According to Investopedia, the head and shoulders chart pattern is considered to be one of the most reliable chart patterns in technical analysis, with a high degree of accuracy in predicting trend reversals. The pattern is formed after an uptrend and consists of three peaks, with the middle peak being the highest (the head), and the two outside peaks being lower (the shoulders). The neckline is drawn connecting the low points between the shoulders.
If the price breaks below the neckline, it is considered a bearish signal, indicating a potential trend reversal. Investopedia states that the accuracy of the head and shoulders pattern is around 80%, which means that the pattern is successful in predicting a trend reversal in 80% of cases. However, it is important to note that this accuracy rate may vary depending on the specific market conditions and the trader's skill in identifying and interpreting the pattern.
Comments
Post a Comment