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2.4 - Pattern recognition for confluency

Head & Shoulders

This is a bearish reversal pattern (failure swing)

  • The left shoulder is formed on increase positive volume
  • Divergence is found from the top of the left shoulder to the top of the head
  • The head will form on lowing / flat OBV, signalling weakness in the trend.
  • The right shoulder will be formed on even lower OBV, showing weakness in the dip buyers
  • When the neck line is broken, the pattern is confirmed and there should be increasing down volume on the sell off (even lower OBV)
  • The measured move is from the neckline to the top of the head.

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