[clmacdougall]

Read "Evidence Based Technical Analysis" pages 151 - 161 concerning the Head and Shoulders pattern for an objective science based answer to the question of it's predictive abilities. A study based on 31 years worth of market data and over 3000 examples of the pattern proved it had no predictive ability whatsoever.

[SIUYA]

Originally Posted by clmacdougall »

Read "Evidence Based Technical Analysis" pages 151 - 161 concerning the Head and Shoulders pattern for an objective science based answer to the question of it's predictive abilities. A study based on 31 years worth of market data and over 3000 examples of the pattern proved it had no predictive ability whatsoever.

i read that book and enjoyed it - I think it more confirmed what i thought early on, as i was constantly told tech analysis does not work....
however - it also did help form my opinion of the importance of context and then once in the trade the importance of trade management.
Nothing works all the time, but it can still help with indications of what might happen.
Personally - HSH, wedges, flags etc - are all formed from abc patterns - apply some context, apply some simple trend analysis, and they offer good low risk areas for entry and trade management.

[TheNegotiator]

That's an interesting study clmacdougall, however I would seriously question the reliability of such a claim. What were the parameters? Which timeframes were used? How were trades managed? In any form of statistical analysis, inaccurate conclusions can be drawn either by intention or by using flawed methods. Not to say this is the case in the study you mention, but I would certainly have to analyse it myself to some degree to have an idea of how good the study is. Just because it is in a book doesn't make it right.

[clmacdougall]

If you can find the book you'd appreciate the amount of work put into the study. Every variable of the H&S pattern is analyzed and scrutinized in order to remove personal subjectivity from the equation and to objectively define the pattern and test it's predictability. It showed only modest results in 2 of 6 currencies and was disastrous when applied to over 100 randomly selected equities.
The first study was performed by Kevin Chang and Carol Osler it was later confirmed by Lo et al. They further said Bulkowski's study was worthless because it failed to objectively define the H&S pattern and wandered off into the pseudo science of subjective TA.

[TheNegotiator]

For me, the key is not to LOOK for these patterns. But if you know them and they pop up clearly, they can work very well.

[Stock Research]

According to me the Head and Shoulders Pattern is the stock price is trying break 3rd time above or below which is called neckline, (The best known of all the reversal patterns, The most powerful of all reversal patterns), i am using the same pattern in my technical analysis to provide NSE India Intraday Stock Trading Tips to my clients, I am just leaving a Call for tomorrow (Monday) market -23-01-2012.

BHARATFORG which perfectly fits into Inverse Head & Shoulders' Pattern in 10min and 15min Chart and it says neckline Bar high value @ 285.1, so BHARATFORG buy above 285.1, Target upto 292 Stoploss upto 279.