The "Head and shoulders" model is the most common reversal model.
The main prerequisite for the formation of a reversal model is the presence of an active trend: from 10.10.22 to 14.11.22, the Index was in an uptrend. The trend line has 3 confirmation points A, B, C. It is important to note that each of these points forms support levels.
After breaking the ABC trend line at point D, the quotes completed a decline at point E, which coincided with the previously established support level C, i.e. the neck line CE.
It is possible to talk about the completion (confirmation) of the "Head and Shoulders" model only after the violation of the CE neck line.
If the model is confirmed, it is necessary to use a measuring approach based on the height of the "head", putting the height down from the neck line to estimate the magnitude of the further decrease.
The main prerequisite for the formation of a reversal model is the presence of an active trend: from 10.10.22 to 14.11.22, the Index was in an uptrend. The trend line has 3 confirmation points A, B, C. It is important to note that each of these points forms support levels.
After breaking the ABC trend line at point D, the quotes completed a decline at point E, which coincided with the previously established support level C, i.e. the neck line CE.
It is possible to talk about the completion (confirmation) of the "Head and Shoulders" model only after the violation of the CE neck line.
If the model is confirmed, it is necessary to use a measuring approach based on the height of the "head", putting the height down from the neck line to estimate the magnitude of the further decrease.