Head and Shoulders or Hands-the Head Patterns are seen below in 39 of the 231 SP-500
stocks from 1988. 39 of the 49 all cases here did meet their minimum downside objective.
This year's study shows the added importance of using the H/S pattern breakdowns
mostly when the break takes the stock below the 65-dma and that break shows an IP21 below -.05.
Waiting for a pullback to short would have prevented shorting 8 of the 11 best H/S Short Sales.
The Study.
There were 49 completed head/shoulders patterns identified here and circled in the charts.
26 of the 49 completed head/shoulders pattterns show pull-backs to
neckline before the minimum downside objective was reached.
Of these 26 pull-backs, in 18 cases, the stock turned down and reached
its mimium downside objective, the height of the H/S pattern from peak to neckline
subtracted from the neckline where the latter was broken. 3 of the pull-backs
did not reach their downside objective.
5 of the 49 had their first rally not stop and instead continue to rise to new highs.
Altogether, 10 of the 49 did not fall at least to their minimum downside objective.
39 of the 49 did reach their downside objective, Most of the declines were small.
7 of these 10 failed H.S breakdowns had a rising 65-dma when prices broke below the
neckline.
7 of these 10 failed H.S breakdowns had an IP21 score above -.05 when prices broke below the
neckline. By contrast 10 of the 11 most successful H/S in this year had an IP21 below -.05.
Mininimum 65-dma broken Classic & 3 month Pull Back to neckline
Objective Met and turned down Symetrical decline potential before low
----------------------------------------------------------------------------------------------------------------------------------
AAPL Jan yes yes yes, flat 9.5 to 8.5 yes
AAPL Nov yes yes no, flat 10.5 to 8.5 no
ADM Feb no no no, flat no decline. no
Note high Accumulation on breakdown. IP21 =+ .267
ADM Aug yes no no, flat 7.5 to 7.0 no
Note high Accumulation
APD Feb yes no yes, flat 11.125 to 10.125 yes
BA June no no no, flat 16.5 to 16. yes - failed
Note high Accumulation on breakdown. IP21 = + .145
BCR Feb yes yes yes, flat 11.0 to 9.5 no
BCR June yes no no, flat 11.8 to 10 yes
BK Sept yes yes yes, rising 6.3 to 4.7 yes
CEG Mar yes yes no, flat 20 to 19.1 no
CI Dec yes yes no, rising 7.1 to 6.5 yes
CSC Mar no no no, rising 8.25 to 8.1 yes - failed
IP21 = -.091 on breakdown
CSC Jun yes no yes, rising 8.8 to 8.1 yes
CSX Mar yes yes no, flat 7.8 to 7.5 no
DE July no no yes, rising 9.4 to 9.35 yes - failed
IP21 = -.031 on breakdown
DE Oct yes yes yes, flat 9.7 to 8.9 no
DNB Oct yes yes no, flat 10.1 to 7.5 yes
DOW Mar yes no no, falling 20.6 to 18.5 yes
DOW Sept yes no no, rising 22 to 20.4 yes - failed (NH)
EFX Oct yes yes no, falling 5.25 to 4.6 yes
FMC Mar yes no no, rising 9.6 to 8.95 no
FMC Oct yes yes no, rising 10.8 to 9.5 no
GCI Sept yes yes no, flat 22.1 to 19.5 yes
GPS June yes no no, flat 1.62 to 1.5 no
GR Sept yes yes no, flat 29.5 to 20 no
Note heavy distribution on right shoulder
GT Sept yes yes yes, falling 25 to 21.5 no
Note heavy distribution on right shoulder
GWW Sept yes yes no, flat 15.4 to 14.2 no
Note heavy distribution on right shoulder
HAS Nov yes yes no, falling 6.3 to 5.3 no
HPQ Feb yes yes no, flat 5.6 to 5.2 yes
INTC June no no yes, falling .93 to .88 yes but failed
IP21 = -.034 on breakdown
IP Feb no yes yes, flat 23.5 to 22.8 yes but failed
IP21 = -.169 on breakdown
IP June no yes no, flat 23.5 to 23.1 no
IP21 = -.161 on breakdown
IP Oct yes yes yes, rising 27.2 to 23.8 no
KO Sept no no hands/above head 8 to 7.8 no
IP21 = -.02 on breakdown
KR Oct yes yes no, rising 4.3 to 3.5 no
Accum turned very negative on breaking of necline.
LEN Feb yes no no, rising 1.6 to 1.28 no
LEN Aug yes yes yes, flat 1.45 to 1.25 yes
LUV May yes no no, rising 1.21 to 1.12 yes
LUV Aug yes no no, rising 1.30 to 1.15 yes
NEM Feb yes no no, rising 32.1 to 27.6 yes
NSC June no no no, flat 11.9 to 11.4 keeps rising
IP21 = -.048 on breakdown
NSC Sept yes no no, rising 13 to 11.6 yes
PH Mar no yes no, rising 8.3 to 7.8 yes but failed
IP21 = +.055 on breakdown
PH Sept yes yes yes, flat 8.75 to 7.25 yes
SLE Aug yes no no, flat 6.15 to 5.8 yes
TSO May yes yes yes, flat 5.75 to 4.5 no
TXN Feb yes yes yes, rising 2.53 to 2.35 no
TXN June yes yes no, falling 2.62 to 1.85 yes
TXN Oct yes yes Continuation yes, falling 2.32 to 1.85 no
Accum turned very negative on breaking of necline.
Only 11 of the 49 completed H/S patterns produced a decline of 15% or more.
Pullbacks occurred in 4 cases of 11 before the low was made for the decline.
5 of the 11 showed flat H/S necklines, 3 had a rising neckline, and in 2 instances
the neckline was falling.
In 9 of the 11 more successful H/S patterns, the breaking of neckline occurred with
the stock below the 65-dma at
that time or a day or two later.
In 8 cases the IP21 was
negative on the breakdown below the neckline.
All but one of these had an
IP21 below -.05.
In only 3 of the 11 did the
Tiger chart show red high volume.
15% Declines or More below Neckline
IP21 <0
IP21
on 65-dma
broken Classic &
3 month
Pull Back
on
Breakdown breakdown and turned
down Symetrical decline
potential before low
------------------------------------------------------------------------------------------------------------------------------------
AAPL Dec yes
-.054
yes
yes, flat 10.5 to 8.5
no
BCR June yes
-.145 no
no, flat
11.8 to 10 yes
BK
Sept yes -.175 yes
yes, rising 6.3 to 4.7 yes
Red high volume on neckline break.
DNB Oct yes
-.008 yes
no, flat 10.15 to 7.54
yes
GR
Sept yes -.094 yes
no, flat 29.5 to 19.69
no
Note heavy distribution on right shoulder
GT
Sept yes -.187 yes
yes, falling 25 to
21.38
no
Note heavy distribution on right shoulder
HAS
Nov yes
+.199 yes
no, falling 6.44 to 5.26
no
IP
Oct yes -.113
yes
yes, rising 27.2 to 23.8
no
KR
Oct yes -.327 yes
no, rising 4.3 to 3.5
no
Accum turned negative on right shoulder
Red high volume on neckline break.
NEM
Feb yes +.069 no
no, rising 32.1 to 27.6
yes
Red high volume on neckline break.
TSO May yes
+.052 yes
yes, flat 5.81 to 4.5
no
was considered too steep.
