Abstract:

In this article the process of formation of "Head and Shoulders" graphic pattern as well as further quotes movement after the pattern formation is considered. The purpose of the work is to verify the suitability and efficiency of using the Head and Shoulders pattern in order to make medium-term and short-term investment decisions and to forecast the profitability of trading positions. The paper presents the results of formation analysis of the Head and Shoulders pattern both on the market with an upward trend and on the market with a downward trend. The main emphasis was made on price objectives in the formation, as well as the identification of specific features of the pattern that increase the probability of investment decisions. The results of the study provide the data on the most probable average values of such indicators as: the period of pattern formation, the period of achievement of the absolute and relative H&S target, the average value of price movement after the pattern confirmation etc. Furthermore, our findings can be interesting
and useful for technical analysts and portfolio managers in the process of stocks price patterns charting and analysis.