Working Money magazine.  The investors' magazine.
Traders.com Advantage

INDICATORS LIST


LIST OF TOPICS





Article Archive | Search | Subscribe/Renew | Login | Free Trial | Forgot ID?


PRINT THIS ARTICLE

HEAD & SHOULDERS


The QQQQ's Intraday Head & Shoulders Top

07/27/07 09:51:26 AM
by David Penn

The rally in the NASDAQ 100 lasted almost a month before a head & shoulders pattern signaled a correction.

Security:   QQQQ
Position:   N/A

I've had much better luck finding many of the traditional chart patterns such as triangles, diamonds, and head & shoulders in intraday charts compared to daily or weekly charts. It would be one thing if I were simply canvassing all of the intraday price action in all the stocks of the Wilshire 5000 for chart patterns. But many of the patterns I find are in exchange traded funds — even exchange traded index funds — which are a far more restrictive survey sample.

FIGURE 1: NASDAQ 100 UNIT TRUST (QQQQ), HOURLY. This head & shoulders top emerged at the end of a nearly month-long advance in the NASDAQ 100. Note also how the head & shoulders pattern — and its breakdown — also complete a 1-2-3 trend reversal.
Graphic provided by: Prophet Financial, Inc.
 
The head & shoulders pattern in the QQQQ was as close to ideal as you are likely to find. Developing over the days between July 13 and 24, the pattern has the requisite shape of two peaks ("shoulders") separated by a higher peak ("head"). The actual breakdown from this pattern occurred early in the afternoon of July 24, with the QQQQ falling nearly 60 cents in an hour. The market bounced — or, rather, moved sideways — for a few days before resuming the decline. Given the size of the head & shoulders pattern, about $1.00, and a breakdown level at about 49.64, we can project a minimum move to the 48.60–48.50 area. Note that this coincides with potential support at the morning low from July 11 just south of 48.50.

In addition, note how the head & shoulders pattern coincides with the 1-2-3 trend reversal (Figure 1). The QQQQ broke down below the trendline that supported the rally from late June on the morning of July 24 to form the "1" of the 1-2-3 trend reversal, and the bounce hours later represented stage 2. Stage 3 of the reversal followed shortly thereafter as the low from stage 1 of the 1-2-3 trend reversal was taken out to the downside.



David Penn

Technical Writer for Technical Analysis of STOCKS & COMMODITIES magazine, Working-Money.com, and Traders.com Advantage.

Title: Technical Writer
Company: Technical Analysis, Inc.
Address: 4757 California Avenue SW
Seattle, WA 98116
Phone # for sales: 206 938 0570
Fax: 206 938 1307
Website: www.Traders.com
E-mail address: DPenn@traders.com

Traders' Resource Links
Charting the Stock Market: The Wyckoff Method -- Books
Working-Money.com -- Online Trading Services
Traders.com Advantage -- Online Trading Services
Technical Analysis of Stocks & Commodities -- Publications and Newsletters
Working Money, at Working-Money.com -- Publications and Newsletters
Traders.com Advantage -- Publications and Newsletters
Professional Traders Starter Kit -- Software

Click here for more information about our publications!


Comments or Questions? Article Usefulness
5 (most useful)
4
3
2
1 (least useful)

PRINT THIS ARTICLE





S&C Subscription/Renewal




Request Information From Our Sponsors 

DEPARTMENTS: Advertising | Editorial | Circulation | Contact Us | BY PHONE: (206) 938-0570

PTSK — The Professional Traders' Starter Kit
Home — S&C Magazine | Working Money Magazine | Traders.com Advantage | Online Store | Traders’ Resource
Add a Product to Traders’ Resource | Message Boards | Subscribe/Renew | Free Trial Issue | Article Code | Search

Copyright © 1982–2019 Technical Analysis, Inc. All rights reserved. Read our disclaimer & privacy statement.