Tuesday, July 14, 2009

Possible Head and Shoulders Top Forming Part 2

Two weeks later and the pattern continues to play out. We dipped down to test the neckline again, which was expected, at which point the media and everyone else jumped on the head and shoulders play (usually a sign that it won't pan out). I think it still has an outside chance to, though.

Here's what would need to happen...the market would need to stay below $930 (the previous right shoulder high), and once again it would need to dip below $880. With the neckline now changed, the target is actually lower in the $810 range.

The other option is that the market topped today as the former neckline's retest and we continue down to play out the original head and shoulders pattern I posted on the previous post 2 weeks ago (Absolute Strategies: Possible Head and Shoulders Top Forming)


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  1. Chad (LACHAD)July 16, 2009 at 11:19 AM

    The hefty move yesterday with a significant advance/decline ratio may have closed the door on the head and shoulders pattern. Also, a lot of shorts may have shorted that right shoulder in anticipation of the H&S pattern helping with the rally (squeeze). It is a good thing we knew where the risk/reward trade was (below $880) and didn't place any trades because of it. There is still a slight chance the trade will play out, but right now it is looking unlikely. As always we will watch price and let it tell us what it wants to do. On the other hand, volume hasn't been too crazy on these moves up.

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