Chart Pattern Analysis
pattern completion. In Figure 13.6, we see a completed symmetrical triangle for-
mation, but the head and shoulders formation is still merely tentative.
A head and shoulders top formation is regarded as a continuation pattern in a
downtrend and a reversal formation in an uptrend. In similar fashion, an inverted
head and shoulders formation is regarded as a continuation pattern in an uptrend
and a reversal formation in a downtrend. See Figure 13.7.
The minimum one‐to‐one price objective or target for a head and shoulders
top formation is simply the vertical distance between the head and the neckline
projected downward from the neckline breakout level. For an inverted head and
shoulders formation, the vertical distance is projected upward from the neckline
breakout level. Once the minimum projected target is met, a formation will have
avoided any further possibility of failure. See Figure 13.8.figUre 13.6 An Inverted Head and Shoulders Formation.figUre 13.7 Continuation and Reversal Head and Shoulders Formation.