The practical skills of the head and shoulders bottom pattern in the stock market are as follows:
- Volume
The left shoulder requires the coordination of volume and price. In the head, due to a large number of exchanges between long and short sides, the trading volume is also very large, but compared with the left shoulder, the trading volume has shown a decadent trend, which cannot be effectively increased or is lower than the level of the left shoulder. Due to the serious damage to the vitality in the process of withdrawal , the trading volume showed a trend of continuous shrinking. The volume of the broader market when the head and shoulders top was built at 2245 points showed this more-less-more-less feature.
- neckline
The horizontal pressure line formed by connecting the two-point troughs in the head pattern is the neckline. In the head and shoulders top, the neckline is not necessarily a horizontal line, but no matter whether the neckline slopes up or down, it cannot change the fate of free fall. . The neckline of the head and shoulders top at 2245 points in the broader market is sloping downward, indicating that the downward momentum is sufficient.
- Breakthrough
When the top of the head and shoulders breaks down the neckline, it is different from the bottom of the head and shoulders. It does not need the cooperation of the volume, that is, the breakthrough of shrinking volume is also effective. After falling below, it is often accompanied by pullback confirmation, and the breakthrough is generally 3% above the neckline as the standard. The breakthrough of the top of the head and shoulders is often much more reliable than the bottom of the head and shoulders. Of course, in actual combat, as long as the neckline is not broken, it still cannot be concluded that it will reverse and go down, although this will lose the best opportunity to sell at the head, but if you want Selling sky-high prices is very difficult in practice.
- Measure the decline
First measure the maximum distance from the head to the neckline, start from the breakout position, and subtract the maximum distance from the bottom to get the measured drop of the head and shoulders. This is only a theoretical decline, and the stock price still has the momentum to continue to decline after completing the measured decline.