What is Head And Shoulders Pattern?

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A head and shoulders pattern is used in technical analysis. It is a specific chart formation that predicts a bullish-to-bearish trend reversal. The pattern appears as a baseline with three peaks, where the outside two are close in height, and the middle is highest.The head and shoulders pattern forms when a stock's price rises to a peak and then declines back to the base of the prior up-move. Then, the price rises above the previous peak to form the "head" and then declines back to the original base. Finally, the stock price peaks again at about the level of the first peak of the formation before falling back down.The head and shoulders pattern is considered one of the most reliable trend reversal patterns. It is one of several top patterns that signal, with varying degrees of accuracy, that an upward trend is nearing its end.

Definition

The Head and Shoulders Top Pattern is a specific chart formation used in technical analysis to predict a trend reversal from a bullish to a bearish market. This pattern is characterized by a baseline with three peaks, where the outer two peaks are close in height, and the middle peak is the highest.

Origin

The concept of the Head and Shoulders Top Pattern originated in the early development of technical analysis, dating back to the early 20th century. Technical analysts identified this pattern by observing market price charts and used it as a tool to predict market trend reversals.

Categories and Features

The Head and Shoulders Top Pattern is a type of top reversal pattern, typically appearing in an uptrend. It features three peaks: the left shoulder, the head, and the right shoulder. The left and right shoulders are usually similar in height, while the head is the highest peak. The formation of this pattern is often accompanied by changes in trading volume, with higher volumes at the left shoulder and head, and lower volumes at the right shoulder.

Case Studies

A typical case is the U.S. stock market before the 2007 financial crisis. In early 2007, many stocks formed a Head and Shoulders Top Pattern, followed by a significant market downturn. Another example is the volatility in the Chinese stock market in 2015, where many stocks formed this pattern at market highs, leading to a substantial market correction.

Common Issues

Common issues investors face when applying the Head and Shoulders Top Pattern include misjudging the formation of the pattern and ignoring changes in trading volume. A common misconception is that all Head and Shoulders Top Patterns will lead to a market decline; however, market conditions and other factors can also affect the pattern's effectiveness.

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Lisbon Treaty

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Labor Intensive

The term "labor-intensive" refers to a process or industry that requires a large amount of labor to produce its goods or services. The degree of labor intensity is typically measured in proportion to the amount of capital required to produce the goods or services: the higher the proportion of labor costs required, the more labor-intensive the business.

Labor Intensive

The term "labor-intensive" refers to a process or industry that requires a large amount of labor to produce its goods or services. The degree of labor intensity is typically measured in proportion to the amount of capital required to produce the goods or services: the higher the proportion of labor costs required, the more labor-intensive the business.

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Fast-Moving Consumer Goods

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Negotiable Instruments

A negotiable instrument is a signed document that promises a payment to a specified person or assignee. In other words, it is a formalized type of IOU: A transferable, signed document that promises to pay the bearer a sum of money at a future date or on-demand.Common examples of negotiable instruments include personal checks, cashier's checks, money orders, certificates of deposit (CDs), promissory notes, and traveler's checks. The person receiving the payment, known as the payee, must be named or otherwise indicated on the instrument. Because they are transferable and assignable, some negotiable instruments may trade on a secondary market.

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Renewable Resource

A renewable resource is a resource that can be replenished naturally over time. As a result, it is sustainable despite its consumption by humankind.Renewable resources for the production of energy are considered especially important for their potential to replace non-renewable, or finite, resources. Additionally, renewable resources can offer cleaner energy solutions than those provided by non-renewable resources such as coal and fossil fuels.Examples of renewable resources include the sun, wind, water, the earth's heat (geothermal), and biomass.

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Feasibility Study

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