Head & Shoulders Chart Pattern

In this excerpt from our options mentoring course, Duane gives us some tips and how to recognize the Head & Shoulders Chart Pattern.

Duane has over 26 years of retail trading experience.
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Head & Shoulders Chart Pattern

Video Transcript

That way I can use dates with the same chart but not have all my drawings on it. On this particular chart we’ll just take a look at it and you can do some really simple things. First you just look for any peaks that you see and you can just, what I would suggest especially if we’re starting, just go ahead and make note of them. Bring in some little extra crutch here, just going to help you start to see and recognize some things that stand out.

Here we see kind of like just a ladder going up. We’ll just draw in a line on that. We draw that up there like that, that’s something else. What else can we see? We see down here a couple low points on that. what I’m doing here is really just kind of first part is identifying, recognizing, observing things that just jump right out of every chart that, I think, anybody can see. Then, we’ll talk about what to do with that. Here, we just see something going down.

There’s a lot of other things you can pick out but now, once we get these things identified, what do we really do with them? How do we have it make any sense? The obvious thing that you can start doing is just connecting some of the dots. When I say just start connect some of the dots, what that’s going to do for you is it’s going to start to show some of the support and resistance levels. Let’s come here and do that. I’ll just connect these two. And I’d like to bring it all the way across but oftentimes what you may say is that, “Okay, this is obvious. These two here, you draw it out and the see and look we test it here. We broke through but came back around before we broke out above it. It looks like it wanted to support us in this whole area.” All of a sudden, these two points, once connected and extended gives us a little extra visibility into the future.

And that’s where it can really come back to be beneficial to us. This is kind of a unique pattern right, so the head and shoulders that form at that point in time. There’s again a zillion things like that. There’s some very common ones and we’re not going to get into that right now. But as you hear us talk about these things each time when we’re in class, if you hear any termite that just, you know, ask for us in an e-mail later or in the afterschool help, whatever the case maybe. “Hey! Go over that head and shoulders. How’d you determine what the outcome of that might be? What was the form that you used?” We can definitely cover that.