Head & Shoulders

The Head and Shoulders indicator marks the formation of a Head & Shoulders pattern.

Description

The Head and Shoulders pattern is an accurate reversal pattern that can be used to enter a bearish position after a bullish trend. It consists of 3 tops with a higher high in the middle, called the head. The line connecting the 2 valleys is the neckline. The height of the last top can be higher than the first, but not higher than the head. In other words, the price tried to make a higher high, but failed. The closer the 2 outer tops are to the same price, the more accurate the pattern.

If the price breaks the neckline and closes below it, the pattern has completed. Conservative traders may look for additional confirmation. The target can be estimated by measuring the height of the pattern (from the neckline to the head) and projecting this downwards. Common stop levels are above the neckline or above the right shoulder.

Default Inputs

NeckSwStrength( 2 ) sets the number of bars to be used to locate each neck line pivot.

HnSSwStrength( 2 ) sets the number of bars to be used to locate the head and shoulders pivots.

VertProportionLimit( .33 ) sets the maximum value of the neckline tilt (the head-to-neck distance).

HiLo( 1 ) sets the parameter to locate either Head & Shoulders tops or bottoms. Enter 1 to locate Head & Shoulders tops; enter -1 to locate Head & Shoulders bottoms.

ConfirmVolume( true ) enter true to use volume to confirm the pattern; enter false to not use volume.

DrawNeckline( true ): enter true to draw the neckline and to plot markers; enter false to not draw the neckline and not plot markers.

BarsPast( 10 ) sets the number of bars after the completion of a Head & Shoulders pattern during which a Close that penetrates the neckline should be marked.

Color1( yellow ) sets a color to use when marking a Head & Shoulders pattern.

Color2( cyan ) sets a second color to use when marking Head & Shoulders patterns.