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Head and Shoulders Patterns

Head and Shoulders Pattern on AUDJPY

Head and Shoulders Pattern on AUDJPY

Head and Shoulders Pattern on AUDJPY is a classical chart pattern and it is also located at the end of a pullback. I’m saying, also, because EURJPY, EURUSD and AUDUSD looks pretty similar.

The premise

If we take a look at the daily chart of the EURJPY we’ll see a clear downtrend. We’ll see also the rising wedge which is a pullback. And, at the end of the rising wedge we have the head and shoulder pattern. So, its location it’s very convenient at the end of the pullback.

head-and-shoulders-pattern-on-audjpy
Head and shoulders pattern on AUDJPY daily chart

False breakout

What I didn’t told you yet is that this particular pattern has an important detail. A false breakout in the continuation of the head. Therefore, as you can see the head is formed by a double top pattern which actually morphed the entire structure into a head and shoulders top pattern. This is one of the reasons why I usually don’t trade the double top pattern. Because its tendency to morph into something else.

How did I trade the head and shoulders pattern on AUDJPY

This is a bit different classical chart pattern because of its false breakout. So, one might be confused about the right level of the sell stop order. I considered the low of the right shoulder to be the last important support level and I placed my sell stop order slightly below the February 7th 2020 daily low candle. Consequently my order is open on February 25th 2020. This is also the kind of trades the I like. Because after only three days later the price dropped in a violent manner. Take a look at the chart.

the-outcome-of-the-head-and-shoulders-pattern-on-audjpy
The outcome of the head and shoulders pattern on AUDJPY daily chart

Conclusion

The obvious conclusion here, especially if you followed my blog for a while is that I tried, again, to outsmart the market. It means that I closed my trade, again, before the price reach its target. So, I really need to stop doing this. And I mean find excuses to collect my profits earlier.

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