Aug, 25, 2004 By Vikram Murarka 0 comments
The Shoulder-Head-Shoulder is one of the most popular Reversal patterns in classical charting as it is visually appealing and promises handsome gains if read correctly. Sometimes, Chartists tend to make a common mistake in reading it though, as illustrated below:
![]() |
![]() |
The fault lay not in the chart pattern, but in the initial reading. A very important point to remember about SHS is that the profit objective from the Neckline is roughly equal to the distance between the Head and the Neckline. As such the previous trend should have been of a sufficiently long duration to accommodate the profit objective. Further, since the SHS is a Trend Reversal pattern (not a Trend Correction pattern), there should ideally be further room available (beyond the profit objective) for the new trend to perpetuate. These conditions were not met in this case of a "false" SHS.
Of course, It does happen sometimes, that even a Classical SHS, meeting the conditions mentioned, does not deliver to its full potential, as seen alongside. The GBPUSD had developed a pronounced Bear SHS in Q1-04, with an ideal Profit Objective near 1.7150. Unfortunately, the low seen was only 1.7480 on 14-May-04, well short of the target.
Since Charting is not an exact science, the only way to deal with this would have been to employ a Trailing Stop Loss to protect Short positions. This is the realm of skilful Trading, an ability acquired with effort and experience.
Assuming greater chances of a slowdown rather than a recession, we project the US10Yr to rise towards 5.25% (May-25), followed by a dip towards 4.55% (Jul-25) and then another rise back towards …. Read More
In our last report (10-Jan-25, Brent $76.95), we expected Brent to remain between $80-60 region with an initial test of $80 in Jan-25 itself before falling to $60 by Jun-25. Thereafter the price was expected to rise slowly in the second half of the year. Brent rose to a high of $82.63, past our Range Top of $80, but has fallen back below $80 from there. … Read More
In our Jan-25 edition (18-Jan-25, EURUSD @ 1.0287), we expected the Euro to come down towards Parity by Mar-25 while below 1.0450 and then rise to 1.06 by Dec-25. In actuality, the EURUSD stayed above 1.025 and rose to 1.0534 ……. Read More
Our February ’25 Monthly Dollar-Rupee Forecast is now available. To order a PAID copy, please click here and take a trial of our service.
Our January ’25 Quarterly Dollar-Rupee Forecast is now available. To order a PAID copy, please click here and take a trial of our service.