Identifying Head-and-Shoulders Patterns In Stock Charts
The bullish head and shoulders are the opposite image of a bearish head and shoulders. It has all the same parts—two shoulders, a neckline, and the head. Only instead of the shoulders and head being formed at high points for the stock, they are formed at low points.
Investor psychology is the opposite of the bearish pattern. The stock is falling and hits a temporary low to form the left shoulder before a bounce occurs and forms the left side of the neck. The upward momentum is temporary and the next down leg takes the stock lower than the left shoulder and forms the head.
Investors jump in thinking the new low is a buying opportunity but then start taking profits after a decent run-up to the neckline. The profit-taking creates the next down leg, but investors start buying on this third down leg before it gets down to the previous low. This forms the right shoulder and starts the next upward move.
Now, the momentum is to the upside and the buying pressure sends the stock above the neckline. At this point, the pattern is confirmed. After breaking above the neckline, the upward momentum is likely to continue and the stock price keeps moving higher.
With the drawings, the patterns are drawn perfectly symmetrical so they are easier to explain and recognize. However, on real charts, the pattern is very rarely symmetrical. Sometimes the neckline will have a little slope to it and one shoulder maybe a little lower or higher than the other.
Here is an example of a bullish head and shoulders pattern that was spotted by the Tickeron Pattern Search Engine on Apple.
The first shoulder is formed in mid-August with the first trip to the neckline coming at the end of August. The head forms on September 25 and then the stock moves up to form the right side of the neck. Another slight dip around October 20 forms the right shoulder and then the stock moves sharply higher and moves all the way up above $173 from the $160 area.
Because the patterns aren’t symmetrical, sometimes they can be difficult to spot. That’s why an artificial intelligence program like Tickeron’s Pattern Search Engine is so valuable. It can find the patterns easier than the human eye and give subscribers more opportunities.
For example, if Tickeron’s AI is asked to detect all head-and-shoulders bullish patterns with a 60%+ confidence level and a greater than 5% distance to the target price (potential profit), then the user would discover that Tickeron’s AI has discovered 3,029 confirmed patterns meeting that criteria, having searched about 4000 stocks, around 10,000 ETFs, hundreds of FOREX and cryptocurrencies.
With that success rate and with the average return on successful readings being so much better, investors could have a tremendous advantage. The Tickeron Pattern Search Engine can help investors find trading opportunities with the touch of a button.
If you’ve never seen technology like this before, it’s because it has never been available to retail investors in this format. The idea is to provide retail investors with technology and tools to enable trading with massive amounts of data and analysis. The end result is arming retail investors with a high-powered, virtual research assistant: Tickeron’s Artificial Intelligence.
Click the link to see statistics for other confidence levels and distance to the target (potential profit) for this pattern: https://tickeron.com/app/patterns/patterns/pattern/13
We invite you to check out our other premium products — they’ll help you be best prepared to take on the market. Some of the premium products that might be helpful for a new trader are the A.I. Pattern Search Engine and the A.I. Trend Prediction Engine. For a continuing trader, A.I. Real Time Patterns and our Screener are great ways to pinpoint what you’re looking for and monitor the securities for an extended period.
AAPL's MACD Histogram just turned positive
The Moving Average Convergence Divergence (MACD) for AAPL turned positive on May 31, 2023. Looking at past instances where AAPL's MACD turned positive, the stock continued to rise in of 37 cases over the following month. The odds of a continued upward trend are .
Technical Analysis (Indicators)
Bullish Trend Analysis
The Momentum Indicator moved above the 0 level on May 26, 2023. You may want to consider a long position or call options on AAPL as a result. In of 70 past instances where the momentum indicator moved above 0, the stock continued to climb. The odds of a continued upward trend are .
Following a 3-day Advance, the price is estimated to grow further. Considering data from situations where AAPL advanced for three days, in of 340 cases, the price rose further within the following month. The odds of a continued upward trend are .
The Aroon Indicator entered an Uptrend today. In of 411 cases where AAPL Aroon's Indicator entered an Uptrend, the price rose further within the following month. The odds of a continued Uptrend are .
Bearish Trend Analysis
The RSI Oscillator demonstrated that the stock has entered the overbought zone. This may point to a price pull-back soon.
The Stochastic Oscillator has been in the overbought zone for 1 day. Expect a price pull-back in the near future.
Following a 3-day decline, the stock is projected to fall further. Considering past instances where AAPL declined for three days, the price rose further in of 62 cases within the following month. The odds of a continued downward trend are .
AAPL broke above its upper Bollinger Band on June 01, 2023. This could be a sign that the stock is set to drop as the stock moves back below the upper band and toward the middle band. You may want to consider selling the stock or exploring put options.
Fundamental Analysis (Ratings)
The Tickeron Profit vs. Risk Rating rating for this company is (best 1 - 100 worst), indicating low risk on high returns. The average Profit vs. Risk Rating rating for the industry is 87, placing this stock better than average.
The Tickeron SMR rating for this company is (best 1 - 100 worst), indicating very strong sales and a profitable business model. SMR (Sales, Margin, Return on Equity) rating is based on comparative analysis of weighted Sales, Income Margin and Return on Equity values compared against S&P 500 index constituents. The weighted SMR value is a proprietary formula developed by Tickeron and represents an overall profitability measure for a stock.
The Tickeron PE Growth Rating for this company is (best 1 - 100 worst), pointing to outstanding earnings growth. The PE Growth rating is based on a comparative analysis of stock PE ratio increase over the last 12 months compared against S&P 500 index constituents.
The Tickeron Price Growth Rating for this company is (best 1 - 100 worst), indicating steady price growth. AAPL’s price grows at a higher rate over the last 12 months as compared to S&P 500 index constituents.
The Tickeron Valuation Rating of (best 1 - 100 worst) indicates that the company is significantly overvalued in the industry. This rating compares market capitalization estimated by our proprietary formula with the current market capitalization. This rating is based on the following metrics, as compared to industry averages: P/B Ratio (44.843) is normal, around the industry mean (93.066). P/E Ratio (30.030) is within average values for comparable stocks, (43.634). Projected Growth (PEG Ratio) (2.696) is also within normal values, averaging (2.077). AAPL has a moderately low Dividend Yield (0.005) as compared to the industry average of (0.028). P/S Ratio (7.386) is also within normal values, averaging (104.308).
Notable companies
Industry description
Market Cap
High and low price notable news
Volume
Fundamental Analysis Ratings
The average fundamental analysis ratings, where 1 is best and 100 is worst, are as follows
General Information
a manufacturer of mobile communication, media devices, personal computers, and portable digital music players
Industry ElectronicsAppliances
AAPL and
Correlation & Price change
A.I.dvisor indicates that over the last year, AAPL has been loosely correlated with SONY. These tickers have moved in lockstep 62% of the time. This A.I.-generated data suggests there is some statistical probability that if AAPL jumps, then SONY could also see price increases.
| Ticker / NAME | Correlation To AAPL | 1D Price Change % | ||
|---|---|---|---|---|
| AAPL | 100% | +0.48% | ||
| SONY - AAPL | 62% Loosely correlated | +1.40% | ||
| GPRO - AAPL | 53% Loosely correlated | +3.87% | ||
| VUZI - AAPL | 48% Loosely correlated | +2.45% | ||
| VZIO - AAPL | 43% Loosely correlated | +2.73% | ||
| LPL - AAPL | 42% Loosely correlated | +1.06% | ||
More | ||||
