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Which is better head and shoulders pattern? Why?

Some head and shoulders patterns are better than others

Head and shoulders patterns are a form of reversal chart patterns. They are high probability setups and have clear distinct features which traders can recognise straight away. Apart from lesson-perfect patterns we see in training material, there are variations observed in real price action. Some are simply better than others and again there are those that are just a case of mistaken identity.

Since traders want to catch a reversal at the right shoulder which is most profitable rather than wait to confirmation at neckline, jumping the right pattern is a must.

 

Inviting our community of students to participate in the quiz

I am inviting students to participate by logging in to comment. In this relatively straight forward quiz, three(3) qualifying participants# (to be decided by me based on clarity and correctness of answer) will receive one(1) voucher worth $40/- each to attend 4M or BP class.

Qualifying participants are those who have attended the TerraSeeds Forex Tflow® Currency Trading Course.

 

Question: Which head and shoulders pattern is better? One with a higher armpit (A) or lower armpit (B)?

Picture of head and shoulders chart pattern

Unless extended, this quiz will close at 12 noon Singapore time tomorrow 13 June 2013.

And for those who are curious, this is the previous quiz run in May ‘Cannot make money with forex trading: bad strategy or trader’s fault

Director, TerraSeeds Market Technician Pte Ltd. Trader, investor. @sohtionghum was picked ‘Top 70 Forex Twitter in 2015’. Operates multiple strategies.

“Dear reader, I do not have a financial license to give advice. I do not know you the reader. Your financial objective and risk tolerance may be different from mine. I am not responsible for any consequence of your action.

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28 thoughts on “Which is better head and shoulders pattern? Why?”

  1. Silvereldon says:

    Question: Which head and shoulders pattern is better? One with a higher armpit (A) or lower armpit (B)?
     
    Through some research, I will strongly conclude that a Higher armpit (A) is a better pattern. As Head and shoulders pattern involves neckline to be drawn to show a clear break out, armpit(A) will provide a diagonal neckline which will provide a better and clearer breakout. In addition, the next support line/ Fibo retracement as take profit will be of higher R:R as compared to B.
     
    As for Armpit B, it does not clearly show a head and shoulder as the support/resistance are across different level. Having a more defined support/resistance will definitely provide traders with the additional assurance in providing them with reason to enter a trade.
     
    In conclusion, Armpit A shows a clearer diagonal neckline which allows traders to keep a look out for break out which they will be able to set a profit target on the next support level.

    1. Soh Tiong Hum says:

      Hi Eldon, your answer of using diagonal neckline as indication of breakout is not part of Tflow® at all. You clearly got it from classical chart patterns. Let me guess: Thomas Bulkowski?

  2. Alex Wijaya says:

    Pattern B is better to short than A.
     
    This is because Pattern A does not make a lower low and make a slightly higher top than the left shoulder. There is higher probability for pattern A to make movement upward. While Pattern B clearly make a lower low on the right shoulder.
     
    Though there is strong retracement upward, the right shoulder looks to come down to fulfill and break the support and there is a better chances to short here.

  3. Chikua says:

    B will be a better answer as is also break the left armpit’s px will will inturn act as a resistance level for price to turn down..

    As for A, although price has broken the Neck Line but the price might hit left armpit’a price level and turn up again creating dwad cat bounce..

  4. Dr Sandeep Rohilla says:

    as prof. Tiong Hum always said- lower armpit , option B
    No need literature for that but yes technically lower armpit make lower low and breaks below recent support, hence likely change of trend.

  5. Clarenceong says:

    IMHO is that Pattern B is better than pattern A, here are the reasons:
     
    The previous Low was broken, means the Support was broken once. The price then retraced up to the same level as the Left Shoulder High but unable to break higher to retest the Highest High and reverse down. That Resistance level at Left Shoulder High also a confluence with Fibonacci Retracement 61.8, making it a strong resistance to form lower High at the Right Shoulder. The angle of the price movement also suggests it has the momentum to break the previous Support again.
     
    The angle of the price movement in pattern A doesn’t suggest a momentum to break down. The previous Support at the Left Shoulder was also never retested, this is a potential of a continuation uptrend.

  6. alexaschan says:

    Pattern b is stronger. In principles of higher hi higher lo, lower lo n lower hi…pattern b has broken a support and potentially showed a lower lo…we just need to look out for a lower hi. And we will try to sport 1234 at the potential lower hi.

    1. alexaschan says:

      Add on N also the wave that broke the support at pattern b, shows a downflow…

  7. viper says:

    Still in office, so give it a try using on my mobile.
    I will go for B. Why?
     
    1. Right shoulder is a retracement back to the low of left shoulder.
     
    2. Right shoulder forms a lower low. This is higher probable trade.
     
    3. Utimately, pattern is completed when the neckline is broken.
     
    Shi fu, this apply to which currency pair at the moment har? Any giveaway tips?

  8. boonpin says:

    I think B would be better. If I were to imagine the boxes drawn, B would be forming a bearish expansion, breaking all the previous supports. Then the right shoulder would actually be a retracement and provide a good entry point to short.

    1. Soh Tiong Hum says:

      Short and sweet but to the point. I like. +1

  9. anaforia says:

    In my opinion, B is better, as a lower armpit shows a higher potential for a downwards reversal. It provides a much stronger signal to trade the reversal.

  10. allantan says:

    Pattern B is better.
     
    With pt B and right shoulder formed, a Lower High Lower Low has been formed. This suggests that bears are taking interest in the situation. Those previously taking a long position will start to unwind their position on this LL LH formation. Those early bears will start to enter the market on any 1234 at the right shoulder. Therefore, the creation of pt B (LL LH) is impt to attract traders attention.
     
    While Pattern A may still be a valid HnS formation, the conviction is lower as no lower low was formed. Instead, price may start to consolidate first, waiting for impt support to be broken.
     
    Happy trading everyone :)

  11. guoyong14 says:

    Sawatdeekhrap

    I chose B
    B made all Bulls cry.
    it made a lower low.
    Khorp Khun khrap.

    Yong

  12. Ulysses Khoo says:

    I choose pattern B.
     
    Neckline of pattern A is up sloping, while neckline of pattern B is down sloping. So I see a downtrend more feasible when even a down sloping line is broken, which to me is even more bearish.
     
    Also, a move above the right shoulder would make the head and shoulder invalid. Since pattern B retrace deeper than pattern A; an upward move after the break of neckline, make price harder to move upwards (to invalid the head and shoulder pattern), since horizontal line across point B is acting as a resistance.

  13. junguochen says:

    The answer is B. because in B the Low is lower than the previous low an early indication that the pattern is gonna change. plus if u do a fib analyasis from the low to the high of the wave. pattern B most likely shows a fib 10 or more meaning more than 100% retracement. that violates Elliot waves theory that a retracement cannot be longer than the flow. thus pattern B will likely form a lower high with fib level 3 or 6 (downflow) and once clear the neckline 13tl should happened resulting a breakout sometimes during news its even more powerful (jaw will drop than clap clap hahaha).
     
    Whereas in pattern A it shows a weakening of the trend where the fib level likely in the area of 7 or 8. this often indicate a slowdown of the momentum. likely goes into a consolidating period.
     
    verdict pattern B is preferred as it will result in more movement and more excitement for traders. pattern A haiz i dono how to trade other than continue with the trend hit box high n tp if there is even a trend to began with……..

    1. Soh Tiong Hum says:

      Very comprehensive thought out answer. Good job.

  14. Michelle says:

    B is better.
     
    A armpit does not show a deep retracement so bull may still be strong. Thus when price move to form right shoulder, there could be a possibility that price continues to move up at A armpit level or may not even reach A armpit level and turn up.
     
    B armpit however, has a deep retracement, which suggest bear has strength. In this case, price could go to left shoulder armpit and fall back down. Price may or may not go up again to form the right shoulder. If right shoulder does form, then this is a reversal pattern with Tflow 1234 in it. Perfect!

  15. GG says:

    I’ll choose A because neckline is not as steep as compared to B.
    HS with steep neckline unlike to go as plan.
    More likely to go flat or resume prior direction.

  16. Andylau says:

    My answer : A is better.
     
    1) The shallow retracement of downward movement of point A to the right shoulder suggests high probability of further downward movement.
     
    2) With the slightly upward sloping of the neckline, the strong and relatively narrow horizontal support zone when broken, becomes a strong resistance zone which is desirable for shorting. Furthermore, in contrast to armpit B, the relatively short “distance” between the current price level and the neckline of armpit A, attracts attention of technical traders to trade this breakout which will help to push the price in the direction we want.

  17. Rachel Tan says:

    B is the stronger bear signal.
     
    A lower armpit signifies a lower low. This means a higher sell volume has surfaced. Formation of the right shoulder, which is lower than the head (and preferably lower than the left shoulder) should indicate a strong sell signal even before the neckline is hit. Well, at least for sure we can collect some pips on the way to the lower neckline as the support is tested.

  18. Kai says:

    Pattern B.
    1. zone that needs to clear for pattern A is wider. From a potential pt 2-> A armpit-> neckline-> then worry about left armpit.uncertainty is there.
    2. Pattern B is to clear Potential pt 2 only. I see left armpit as a level that has been broken twice, down and up, so not a highly regarded level anymore with pattern B.

    3. Though cannot draw Fib. Pattern B looks like EWUS. Using powerful eyes hahaha( just joking, i love Fib)

    1. Soh Tiong Hum says:

      Where is point 2? While I suspect that you are on the right path, your missing link (point 2) makes me worry that you – 打山猪,中老虎 – in other words, got correct answer for wrong reason.

  19. samuel says:

    B is better.
    Bear has more strength with deep retracement. Price may go to left shoulder and fall back down to form right shoulder. If it does, it becomes a reversal pattern with 1234.

  20. weejian84 says:

    I choose B.
    1) B has a lower high lower low
    2) B creates a new downward equidistant channel
    3) B closes below the X of the previous bullish expansion

    I believe the 3 points above have a higher probability for the trend to turn bearish.

  21. Soh Tiong Hum says:

    Hi folks, this quiz is now closed. B is the right answer. I will post an explanation as well as announce the winners on Saturday. I have to take leave suddenly and cannot respond because I don’t have anyone to take care of my son these 2 days.

  22. Soh Tiong Hum says:

    Hi folks, before I write a posting to point out my answer, here are some points to correct:
     
    Correct points to bring up
    1. B is a lower low and implies the start of new trend
     
    2. Lower B ensures that when the right shoulder is formed, it is a deeper retracement of the head to right armpit (point B) movement
     
    Wrong points to bring up
    3. Any reference to the gradient of the neckline is not an appropriate answer under Tflow® although it is a legitimate answer if we were discussing theories of chart patterns.
     
    And the persons who qualify for 1 voucher (worth $40) each are: Ong Boon Pin, Allan Tan and Chen Junguo. I will give Cynthia instructions to contact you and inform you to collect your vouchers.
     
    And for all the rest, thank you for your participation. Good job for all the correct answers and if you got it wrong or did not win a prize, do not be disheartened. Take this as an opportunity to learn from all the rest.

  23. Soh Tiong Hum says:

    Answer to this quiz can be found in this posting ‘Signs that give away a better head and shoulders pattern‘.

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