Online Trading Concepts

Advertisement
Advertisement

Volume and Head and Shoulders

Head and Shoulders

  1. Head and Shoulders Chart Pattern
  2. Volume and the Head and Shoulders Pattern

When the confirmation line of a Head & Shoulders pattern breaks to the downside, a large amount of volume should occur as well.

The chart below of General Electric (GE) shows a sharp increase in volume when the confirmation line of the Head & Shoulders pattern was broken:

head and shoulders with volume confirmation

In addition to the sharp increase in volume, the gap down on the chart of GE also gave strong indication to potentially sell when the confirmation line was pierced.

The same concept applies to a Reverse Head & Shoulders pattern, the break of the confirmation line should be accompanied by an increase in volume.

The chart below of Gold futures illustrates a rise in volume when the confirmation line was pierced:

inverse head and shoulders pattern with volume

Similarly related chart patterns are the Double Top formation (see: Double Top) and the Double Bottom formation (see: Double Bottom).

The information above is for informational and entertainment purposes only and does not constitute trading advice or a solicitation to buy or sell any stock, option, future, commodity, or forex product. Past performance is not necessarily an indication of future performance. Trading is inherently risky. OnlineTradingConcepts.com shall not be liable for any special or consequential damages that result from the use of or the inability to use, the materials and information provided by this site. See full disclaimer.