Amar Raja Batteries has formed the Head and Shoulders pattern. While considering a trade involving the H&S pattern we should consider the following things:
1. The prior trend should be an Uptrend, The H&S pattern is basically a trend reversal pattern.
2. The price should form an identifiable Left and Right Shoulder with a high Head. This may not always be symmetrical and perfect.
3. As the pattern continues to form from the L. Shoulder to the Head, the volume should gradually decrease. This indicates that the price is losing momentum.
4. Once the Neckline is broken we can enter into a short trade with a target equivalent to the height of the head from the Neck Line but in the opposite direction. However, it would be prudent to keep the target at a level that has acted as an important support/resistance previously.
5. Also, the best case scenario is a successful Retest at the Neckline.
Note: As this would be a short trade I will only take a paper trade in this case for gaining confidence so that one day I can enter such trades with conviction. If there are other points to be considered in this trade kindly mention the same.
1. The prior trend should be an Uptrend, The H&S pattern is basically a trend reversal pattern.
2. The price should form an identifiable Left and Right Shoulder with a high Head. This may not always be symmetrical and perfect.
3. As the pattern continues to form from the L. Shoulder to the Head, the volume should gradually decrease. This indicates that the price is losing momentum.
4. Once the Neckline is broken we can enter into a short trade with a target equivalent to the height of the head from the Neck Line but in the opposite direction. However, it would be prudent to keep the target at a level that has acted as an important support/resistance previously.
5. Also, the best case scenario is a successful Retest at the Neckline.
Note: As this would be a short trade I will only take a paper trade in this case for gaining confidence so that one day I can enter such trades with conviction. If there are other points to be considered in this trade kindly mention the same.