My charts (and yours too........)
- Thread starter babukraman
- Start date
- Tags inv hns sffp wipro
Hi RnE,
Let me give you my posting of failed HnS on another forum.
Date: Friday, 17 September, 2010, 12:57 PM
From mid June to the end of Aug, LT was forming HnS. Beginning September, the formation failed. I was just curious of that failure. As I am currently reading "Trading for a living", I came across his views on the failure of HnS (of any chart pattern for that matter). He describes it as "the Hound of Baskerville". I thank Mr. Elder, Alexander for the below reprint. He also notes that the aborted HnS pattern's b/o above the head, often results in a very strong rally.
The Hound of the Baskervilles
This signal occurs when a reliable chart or indicator pattern does not lead to the action you expect and prices move in the opposite direction. A head-and shoulders pattern indicates that the uptrend is over. If prices continue to rise, they give the Hound of the Baskervilles signal.
This signal is named after the story by Sir Arthur Conan Doyle in which Sherlock Holmes was called to solve a murder at a country estate. He found the essential clue when he realized that the family dog did not bark while the murder was being committed. That meant the dog knew the criminal and the murder was an inside job. The signal was given by the lack of expected
action - by the lack of barking!
When the market refuses to bark in response to a perfectly good signal, it gives you the Hound of the Baskervilles signal. This shows that something is fundamentally changing below the surface. Then it is time to get in gear with the new powerful trend.
A head-and-shoulders pattern gives a strong sell signal. If the market refuses to collapse but rallies from the right shoulder, it gives you its Hound of the Baskervilles signal. When prices rise above the head, it is time to cover shorts, reverse, and go long. An aborted head-and-shoulders top often leads to a very strong rally. Buy the upside breakout, and place a protective stop slightly below the top of the head.
Regards,
Babu Kothandaraman
Please post your examples as well. All of us stand to learn from your views as well. Thanks!
Let me give you my posting of failed HnS on another forum.
Date: Friday, 17 September, 2010, 12:57 PM
From mid June to the end of Aug, LT was forming HnS. Beginning September, the formation failed. I was just curious of that failure. As I am currently reading "Trading for a living", I came across his views on the failure of HnS (of any chart pattern for that matter). He describes it as "the Hound of Baskerville". I thank Mr. Elder, Alexander for the below reprint. He also notes that the aborted HnS pattern's b/o above the head, often results in a very strong rally.
The Hound of the Baskervilles
This signal occurs when a reliable chart or indicator pattern does not lead to the action you expect and prices move in the opposite direction. A head-and shoulders pattern indicates that the uptrend is over. If prices continue to rise, they give the Hound of the Baskervilles signal.
This signal is named after the story by Sir Arthur Conan Doyle in which Sherlock Holmes was called to solve a murder at a country estate. He found the essential clue when he realized that the family dog did not bark while the murder was being committed. That meant the dog knew the criminal and the murder was an inside job. The signal was given by the lack of expected
action - by the lack of barking!
When the market refuses to bark in response to a perfectly good signal, it gives you the Hound of the Baskervilles signal. This shows that something is fundamentally changing below the surface. Then it is time to get in gear with the new powerful trend.
A head-and-shoulders pattern gives a strong sell signal. If the market refuses to collapse but rallies from the right shoulder, it gives you its Hound of the Baskervilles signal. When prices rise above the head, it is time to cover shorts, reverse, and go long. An aborted head-and-shoulders top often leads to a very strong rally. Buy the upside breakout, and place a protective stop slightly below the top of the head.
Regards,
Babu Kothandaraman
Please post your examples as well. All of us stand to learn from your views as well. Thanks!
Thanks Babu, nice explanation prolly the view wouldve given me a bit more confidence entering the two trades on LT.
I ususally take a shorter term view of charts, and limit entries to 3rd waves, 5ths can be extended but as a rule i avoid 5ths. Patterns must be very tight and must reflect an immideate sentiment. [need to read some more on elliots regarding conditions for accelerating 5ths].
LT gave two trades, the first happend when a small red body crossed the top of the first wave, with a triple touch [i trade only three resistence / three supports + the occasional gap if it happens at the expected end of a correction - leads to an extened first, or if the gap happens across a first wave]
The condition for a good thrid is almost always a good first.
=============================================
Not sure if this qualifies for a traditional head and shoulders pattern, but the philosophy is the same, the correction should be under a resistence, the first impulse should try to get thru it, but since its already travelled a distance, it eases back into a second to about 61.8 (for best results) then shoots thru in the third.
More the points and stronger the fist wave, better the break [Also helps identify strong patterns from weak ones]
I ususally take a shorter term view of charts, and limit entries to 3rd waves, 5ths can be extended but as a rule i avoid 5ths. Patterns must be very tight and must reflect an immideate sentiment. [need to read some more on elliots regarding conditions for accelerating 5ths].
LT gave two trades, the first happend when a small red body crossed the top of the first wave, with a triple touch [i trade only three resistence / three supports + the occasional gap if it happens at the expected end of a correction - leads to an extened first, or if the gap happens across a first wave]
The condition for a good thrid is almost always a good first.
=============================================
Not sure if this qualifies for a traditional head and shoulders pattern, but the philosophy is the same, the correction should be under a resistence, the first impulse should try to get thru it, but since its already travelled a distance, it eases back into a second to about 61.8 (for best results) then shoots thru in the third.
More the points and stronger the fist wave, better the break [Also helps identify strong patterns from weak ones]
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