Categories
Inverted Head and Shoulders Patterns

Inverted Head and Shoulders on ETHUSD

Inverted Head and Shoulders on ETHUSD

Inverted Head and Shoulders on ETHUSD is a classical chart pattern, located after a 160% rally (gain). Therefore, it might suggest a continuation.

The premise

As any trader should know, there are two types of an inverted head and shoulders pattern. The normal inverted head and shoulders pattern which always indicate a possible reversal. And a continuation inverted head and shoulders pattern which always indicate a possible continuation of the preceding move. Therefore, today we have a continuation inverted head and shoulders pattern.

Inverted SHS pattern or a symmetrical triangle?

That’s a very interesting question for our today’s pattern. Take a look at the next daily chart of ETHUSD. We can see that the main trend is in the downside. We have a rally from December 2019 to February 2020. At the end of this rally we have an Inverted Cup and Handle pattern on ETHUSD. You can find all the details about this trade by clicking on the link. After the inverted cup and handle pattern, we have a nice drop of 60%, from about 200$ to 80$. And, after this drop, we have another rally. An 160% one, from 80$ to 220$. So, now, we have the today’s pattern. Is it an inverted SHS pattern or a symmetrical triangle? The answer is simple: in this case, both of them are valid. And most important, both have the same implications.

inverted-head-and-shoulders-on-ethusd-detail
Inverted head and shoulders on ETHUSD daily chart detail

How did I trade the inverted head and shoulders pattern?

I simply placed a buy stop order slightly above the resistance of the pattern. And, I considered resistance the May 18th 2020 daily candle high. Consequently, my order is open on May 29th 2020.

The breakout

The first important thing is that the breakout candle was a bullish one. But not the wide body type. Even so, at the end of the breakout day the trade was still valid. And, on the next day, even if the price opened lower, the price went up in a strong manner. Therefore, we have our real breakout candle.

How did I manage this trade?

Because of the vicinity of the previous resistance, and the fact that the price already went up 160%, I decided to open this trade with a 0.7% risk. And, I also need to mention that it is a 1:3 risk reward trade. I also decided to be aggressive with this trade from the same reasons. So, after the second day, when the price went up in a strong manner, I decided to take a half from my profits when the trade reached 1% gain. And I also decided to move my stop on breakeven. The next two days, the price went a bit up and a bit down. But, without challenging my breakeven stop. And after another day, I decided to close the other half of the trade in the 250$ zone.

the-outcome-of-the-inverted-head-and-shoulders-on-ethusd
The outcome of the inverted head and shoulders on ETHUSD daily chart

The conclusion of the inverted head and shoulders pattern on ETHUSD

I decided to close the trade in that zone, because the 250$ it’s a psychological price level, and I really didn’t want to risk my entire position for a small remained part of the trade. Therefore, I don’t have a very great conclusion for this trade. Because, as I already said in my previous articles, the best lessons are learned from the losing trades. But, I still think that is important to have a trade management plan, because, more often than not, the market won’t go straight to the target. And this is what I wanted to show you with this article: how I managed this trade even is the location of the pattern wasn’t the best.

One more thing

The last thing, for now, is that I would really appreciate if you could show your support for my work and follow Capital Patterns on Twitter and Facebook. Or even subscribe to my newsletter. It would be really motivational and it would mean a lot to me. Thank you!

Stay Informed

If you find my articles useful just scroll a bit and follow me on twitterFacebook or sign up to my newsletter for more future updates. I promise you won’t regret it!

One reply on “Inverted Head and Shoulders on ETHUSD”

Leave a Reply

Your email address will not be published. Required fields are marked *