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Gate.io AMA : Reversal K-line Pattern - Head and Shoulders Top
07 March 15:04
Today let's study more about Reversal Technical Pattern - Head and Shoulders Top.
Basic Definition:
The Head and Shoulders Top is when the price rises sharply, and the trend forms three obvious peaks with the middle slightly higher than the two sides. The three peaks are called left shoulder, head and right shoulder in order from left to right.
Volume at the Head and Shoulders Top often shows a step-down.
As shown in the following picture :
A Head and Shoulders Top is a reversal technical pattern that often signals the end of a bull market, but also often occurs at the top of a mid-term uptrend.
The technical characteristics of the Head and Shoulders Top
1) Appears in a strong uptrend with a large increase and volume
2) At the end of the rise, the price rose and fell three times, forming three distinct peaks. The high points of the left and right peaks are basically at the same level, which is called the left shoulder and the right shoulder; the peak in the middle is significantly higher than the left and right shoulders, which is called the head.
3) The low points of the left shoulder and the head are basically the same. Connect the two low points with a straight line, which is the neckline of the Head and Shoulders Top. If the price falls below the neckline for the last time, the Head and Shoulders Top will be established.
4) The volume increases each time it rises and decreases when it falls. However, from the left shoulder to the head to the right shoulder, the overall decrease is in a step-by-step manner.
The technical meaning of Head and Shoulders Top
After the price effectively falls below the Head and Shoulders Top neckline, the trend will change from rising to falling, which is a sell signal .
Example of BTC real order
In the Apr.15 BTC market, after rising for several months, BTC reached a maximum of $65,000, and then formed a compound Head and Shoulders Top pattern at a high level. After falling below the neckline of $50,000 at 5.15, it fell all the way, and fell as high as 42.35% for 68 consecutive days, reaching a minimum of $29,000.
Special reminder
Technical form
1) The Head and Shoulders Top is mostly a long-term trend reversal pattern, which usually appears at the end of a bull market.
2) The right shoulder of the top of the Head and Shoulders Top is lower than the head, and the high point of the surface price is no longer higher than the previous high, indicating that a bear market is coming.
3) When the price falls below the neckline of the Head and Shoulders Top, it indicates that the low point is lower than the previous low point, confirming the advent of a bear market.
4) The completion of the Head and Shoulders Top is subject to the effective breakthrough of the neckline, which is also the exit standard for traders to Sell.
Whether a Head and Shoulders Top appears at the top of a long-term trend, or a mid-term trend top, a break below the neckline is confirmation of a trend reversal. It confirmed trends generally continue in the direction, so a break below the neckline is a real Sell signal.
Although this is compared with the highest point, the price has dropped by a considerable amount, but the decline is just beginning, and traders who have not sold out should continue to sell.
In terms of transaction volume
1) The volume of Head and Shoulders Top is generally the largest on the left shoulder, followed by the head, and the least on the right shoulder. However, the Head and Shoulders Top left shoulder volume is equal to or less than the head, and does not affect the establishment of the Head and Shoulders Top
2) To confirm whether the falling below the neckline is valid or not, only the price shall prevail, and it has nothing to do with whether the trading volume is enlarged. However, if the volume surges when the neckline is broken, it indicates that the market selling force is very strong, and the price may accelerate the decline
3) When the lower trading volume falls below the neckline, the possibility of a pull back is slightly greater than that when the higher trading volume falls below the neckline.
Disclaimer:
This article is for reference only.
Such information provided by Gate.io does not constitute any investment advice and is not responsible for any of your investments.
Regarding technical analysis, market judgment, trading skills, trader sharing, etc., may involve potential risks, investment variables and uncertainties.
This article does not provide or imply any opportunity to guarantee profits.
Basic Definition:
The Head and Shoulders Top is when the price rises sharply, and the trend forms three obvious peaks with the middle slightly higher than the two sides. The three peaks are called left shoulder, head and right shoulder in order from left to right.
Volume at the Head and Shoulders Top often shows a step-down.
As shown in the following picture :
A Head and Shoulders Top is a reversal technical pattern that often signals the end of a bull market, but also often occurs at the top of a mid-term uptrend.
The technical characteristics of the Head and Shoulders Top
1) Appears in a strong uptrend with a large increase and volume
2) At the end of the rise, the price rose and fell three times, forming three distinct peaks. The high points of the left and right peaks are basically at the same level, which is called the left shoulder and the right shoulder; the peak in the middle is significantly higher than the left and right shoulders, which is called the head.
3) The low points of the left shoulder and the head are basically the same. Connect the two low points with a straight line, which is the neckline of the Head and Shoulders Top. If the price falls below the neckline for the last time, the Head and Shoulders Top will be established.
4) The volume increases each time it rises and decreases when it falls. However, from the left shoulder to the head to the right shoulder, the overall decrease is in a step-by-step manner.
The technical meaning of Head and Shoulders Top
After the price effectively falls below the Head and Shoulders Top neckline, the trend will change from rising to falling, which is a sell signal .
Example of BTC real order
In the Apr.15 BTC market, after rising for several months, BTC reached a maximum of $65,000, and then formed a compound Head and Shoulders Top pattern at a high level. After falling below the neckline of $50,000 at 5.15, it fell all the way, and fell as high as 42.35% for 68 consecutive days, reaching a minimum of $29,000.
Special reminder
Technical form
1) The Head and Shoulders Top is mostly a long-term trend reversal pattern, which usually appears at the end of a bull market.
2) The right shoulder of the top of the Head and Shoulders Top is lower than the head, and the high point of the surface price is no longer higher than the previous high, indicating that a bear market is coming.
3) When the price falls below the neckline of the Head and Shoulders Top, it indicates that the low point is lower than the previous low point, confirming the advent of a bear market.
4) The completion of the Head and Shoulders Top is subject to the effective breakthrough of the neckline, which is also the exit standard for traders to Sell.
Whether a Head and Shoulders Top appears at the top of a long-term trend, or a mid-term trend top, a break below the neckline is confirmation of a trend reversal. It confirmed trends generally continue in the direction, so a break below the neckline is a real Sell signal.
Although this is compared with the highest point, the price has dropped by a considerable amount, but the decline is just beginning, and traders who have not sold out should continue to sell.
In terms of transaction volume
1) The volume of Head and Shoulders Top is generally the largest on the left shoulder, followed by the head, and the least on the right shoulder. However, the Head and Shoulders Top left shoulder volume is equal to or less than the head, and does not affect the establishment of the Head and Shoulders Top
2) To confirm whether the falling below the neckline is valid or not, only the price shall prevail, and it has nothing to do with whether the trading volume is enlarged. However, if the volume surges when the neckline is broken, it indicates that the market selling force is very strong, and the price may accelerate the decline
3) When the lower trading volume falls below the neckline, the possibility of a pull back is slightly greater than that when the higher trading volume falls below the neckline.
Disclaimer:
This article is for reference only.
Such information provided by Gate.io does not constitute any investment advice and is not responsible for any of your investments.
Regarding technical analysis, market judgment, trading skills, trader sharing, etc., may involve potential risks, investment variables and uncertainties.
This article does not provide or imply any opportunity to guarantee profits.
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