Decoding Market Signals: The Head and Shoulders Pattern
Updated
Good morning seasoned traders,
Ever heard of the Head and Shoulders pattern? Well, depending on which study you consult, it's said to play out between 50-81% of the time. Quite the range, right? But some reliable sources swear by that impressive 81% success rate.
Now, let's take a peek at the ES chart. Can you spot what I'm seeing? Yep, potentially a Head and Shoulders formation in the making.
I mentioned yesterday that if we faced rejection around 5125 (and boy, did we overshoot!), we might be eyeing the 5000 level in the coming days or weeks. I get it, it's tough to wrap your head around, especially after riding the glorious bull trend for so long. But hey, consider this a cautionary sign worth keeping in your arsenal.
Lately, index heavyweights have been dragging their feet, underperforming for weeks on end. And if this trend persists, well, you can guess what might happen.
Remember when hedge funds bailed on Mag7 back in early Feb? Yeah, they're not rushing back just because there's a modest discount on the table. They'll hold out for a better deal.
As we hover around the Value Area, dangerously close to POC, the bulls are desperately trying to salvage this trend. But let's face it, the next significant support is lurking around 4960-80. Not too far, huh? But enough to wipe out all those short and mid-term calls.
Mark my words, it's never a straight line. So brace yourselves for a choppy ride over the next 5-6 days. It took nearly a week to carve out a left shoulder. Give it another 6 days for the right one, and we could be chopping till March 12th before waving the white flag.
Now, I'm not saying this is our base case scenario, but hey, risk management is the name of the game. Keep that in mind as you navigate these choppy waters.
Ever heard of the Head and Shoulders pattern? Well, depending on which study you consult, it's said to play out between 50-81% of the time. Quite the range, right? But some reliable sources swear by that impressive 81% success rate.
Now, let's take a peek at the ES chart. Can you spot what I'm seeing? Yep, potentially a Head and Shoulders formation in the making.
I mentioned yesterday that if we faced rejection around 5125 (and boy, did we overshoot!), we might be eyeing the 5000 level in the coming days or weeks. I get it, it's tough to wrap your head around, especially after riding the glorious bull trend for so long. But hey, consider this a cautionary sign worth keeping in your arsenal.
Lately, index heavyweights have been dragging their feet, underperforming for weeks on end. And if this trend persists, well, you can guess what might happen.
Remember when hedge funds bailed on Mag7 back in early Feb? Yeah, they're not rushing back just because there's a modest discount on the table. They'll hold out for a better deal.
As we hover around the Value Area, dangerously close to POC, the bulls are desperately trying to salvage this trend. But let's face it, the next significant support is lurking around 4960-80. Not too far, huh? But enough to wipe out all those short and mid-term calls.
Mark my words, it's never a straight line. So brace yourselves for a choppy ride over the next 5-6 days. It took nearly a week to carve out a left shoulder. Give it another 6 days for the right one, and we could be chopping till March 12th before waving the white flag.
Now, I'm not saying this is our base case scenario, but hey, risk management is the name of the game. Keep that in mind as you navigate these choppy waters.
Note
Pattern was invalidated yesterday.
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