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Inverse Head and Shoulder Breakouts

By  +Follow August 26, 2013 9:15AM
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Classic head-and-shoulder patterns are often used to spot breakdowns, before a stock price drops. Learning how to find and trade “inverse” head and shoulder breakouts can be an effective strategy for finding new long trading entries as they’re about to occur.  In this article we’ll look at various examples of how to trade this strong reversal pattern.

Inverse Head and Shoulder Patterns For Swing Trading

New entries can be found following a inverse head and shoulders pattern, which looks like a series of 3 “cups”, in which new buyers come in at new highs.  As you can see in Figure 1, Endo Health Solutions Inc ($ENDP), there is a left shoulder, a “head”, and a right shoulder.  The ‘neckline’ connects the top of each shoulder, and the trading entry is placed just above this right shoulder high.


The basic pattern is also illustratated in Figure 1, so that you can see what to look for. Note that this pattern may often occur at a slight angle, as shown in the chart’s actual price action.  These entries are also effective in helping traders spot uptrend reversals following sell pressure.
For risk management, typical swing trading entry and exit setups are as follows: entry signal is placed .35 cents (thirty-five cents) above the high of the right shoulder. A maximum of 1.0 point stop-loss and trailing stop is used.  Scaling in to add to winning trades is done every 1 point, to double the share size during an uptrend, using a 1-point trailing stop to lock in profits.

Daily Candlestick Charts and Inverse Head and Shoulder Trades

Using a 90-day daily candlestick chart is an excellent way to scan for strong entry patterns.  It may be challenging at first to spot inverse head-and-shoulder long patterns.   It’s not always necessary to see a classic perfectly-formed pattern, as these are rare. The key is to find one that’s strong enough to generate a successful entry, and shows momentum of new buyers entering at new highs.
In Figure 2, MGM Resorts International ($MGM), the left shoulder area is seen from approximately June 10th through 18th, the head (bullish cup) is formed June 19th through 28th, and the right shoulder is July 2nd through 8th.   Seeing these multiple cup patterns helps identify new entries, as price action takes out new highs.When drawing the neckline, it’s best to be conservative and use the candles that best mark out a clear cup pattern (which looks like the letter “U”).  Entering too soon during consolidation often leads to choppy entries, so it’s smart to wait until new highs are confirmed prior to entering.

Day Trading With Inverse Head and Shoulder Breakouts

Using 1-minute candlestick charts to spot long entries for intraday trade opportunities can help traders quickly find potential trading opportunities. In Figure 3, Tesla Motors Inc. ($TSLA) we see a this inverse head and shoulder pattern with major resistance being near 149.5 on the neckline and both shoulders.


As is seen in the chart, correctly drawing the neckline would have us wait until a full thirty minutes after the rightmost shoulder was formed, prior to entering the trade.  Connecting the shoulder tops to establish the proper resistance area using the neckline can be a significant factor in helping wait until a very strong breakout is in progress, during which the trade entry is made.

Waiting for a good trade setup to materialize is where the inverse head and shoulder strategy is especially useful.  Traders often enter too early and get stopped out during consolidation or pullback areas.  Using a correctly-marked inverse head and shoulders pattern can help with this, b requiring traders to wait until after the rightmost shoulder has formed using the 1-minute candlestick chart, prior to entering their trades.
Ken Calhoun is a trading professional who has traded millions of dollars of equities since the 1990s, and is the producer of multiple award-winning trading courses and video-based training systems for active traders.  He is a UCLA alumnus and is the founder of TradeMastery.com and DaytradingUniversity.com, popular online educational sites that reach tens of thousands of active traders worldwide.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions.


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Results for ENDP
HotKeyTrading
28 Jan 15 22:00:07
All-Time Highs: $ENDP $O $ABMD $COMM $ADVS $UDR $CPT $NYLD $TEL $ADS $INT $SMG $UNFI $TTWO $VNTV http://t.co/TRx9EnjwT5 #dow #analyst #mkt
HotKeyTrading
28 Jan 15 21:07:16
Annual Highs: $ENDP $DOX $BA $ASX $CBLI $COMM $LPL $IIVI $KLIC $SIRI $SIMO $WOOF $INFA $HURN $NYLD http://t.co/Vv2VEnpBuv #spy #daytrading
Stockaholics
28 Jan 15 19:40:35
Our Penny Stock Picks On $IJJP $TUNG & $QLTS Gained 117% In 3 Days! New Pick Coming: http://t.co/c7bXDM1sfp $HLF $NUS $ENDP
Mr. Breakout
28 Jan 15 19:17:15
Today's ALL TIME NEW HIGHS, Over $1.00, Closed Up on at least 1.1x ADV(50) ►►► http://t.co/rXM2MP8184 Incl: $SPIL $ROL $FSL $ENDP etc
Ticker Report
28 Jan 15 18:41:21
Traders Sell Endo International plc – on Strength $ENDP http://t.co/p48A0UMNRf
12Stocks.com
28 Jan 15 16:03:08
MidCap #Stocks Trend $FSL $EA $TUP $TSS $COMM $ROL $SBH $PBF $ENDP $GHC $OC $HPT $ABC $ARCC $WAT $KSS $MWV @ http://t.co/gYYX3fEVde
12Stocks.com
28 Jan 15 16:02:52
MidCap #Stocks Performance $FSL $EA $TUP $X $TSS $COMM $JNPR $ROL $FCNCA $SBH $WDC $PBF $CYT $ENDP $MAT more@ http://t.co/gYYX3fEVde
Walk
28 Jan 15 15:26:45
$MIC, $ANIP, $EXAM, $SKX, $EPAM, $CSCD, $MTSN, $QRVO, $CEMP, $ENDP stocks of interest to me >> daily charts >> http://t.co/GInYqr2GkU
Drew Killah
28 Jan 15 14:19:51
“@paulwoll: .@DrewDog12380 https://t.co/kWXNxJpelt $ENDP nice LONG setup for example... :)” little over bought but volume looks good.
Woll Street
28 Jan 15 14:18:01
.@DrewDog12380 https://t.co/wTGvfMboem $ENDP nice LONG setup for example... :)
12Stocks.com
28 Jan 15 13:01:40
MidCap #Stocks Trend $FSL $EA $TUP $TSS $COMM $SBH $ENDP $PBF $AMG $ROL $SPR $VNTV $LUV $ACC $WOOF $HLT $OC @ http://t.co/gYYX3fEVde
Stockaholics
28 Jan 15 11:30:08
Our Penny Stock Alert On $QLTS Has Gained 34.62% In The Past 2 Days! Special Update: http://t.co/MNFk4FhSe1 $HLF $NUS $ENDP
HotKeyTrading
28 Jan 15 10:00:07
All-Time Highs: $ENDP $O $ABMD $COMM $ADVS $UDR $CPT $NYLD $TEL $ADS $INT $SMG $UNFI $TTWO $VNTV http://t.co/TRx9EnjwT5 #analytics #trading
Penny Stock Secret
28 Jan 15 09:32:22
This Man Turned $100 Into Over $10,000 In Just 30 Days! Proof Here http://t.co/SVqoMlijqL .. $HLF $NUS $ENDP
Stock Rocket
28 Jan 15 07:31:29
Our Penny Stock Alert On $QLTS Has Gained 34.62% In The Past 2 Days! Special Update: http://t.co/SK1yaqFkM1 $HLF $NUS $ENDP
Joseph Fahmy
28 Jan 15 06:58:20
A few stocks approaching new highs: $ENDP $TAP $AMED
clayton
28 Jan 15 05:53:49
Stocks Trending Now: http://t.co/2RP342qvZt $TMXLF $DBDIF $MAIN $HACBY $TDF $ENDP $WEICF $CHEAF $DVA $CLLXF $STBZ $WRD ~
Stock Rocket
28 Jan 15 00:40:31
Our Penny Stock Alert On $QLTS Has Gained 34.62% In The Past 2 Days! Special Update: http://t.co/SK1yaqFkM1 $HLF $NUS $ENDP
Stockaholics
27 Jan 15 20:34:21
Our Penny Stock Alert On $QLTS Has Gained 34.62% In The Past 2 Days! Special Update: http://t.co/MNFk4FhSe1 $HLF $NUS $ENDP
lookn4wins
27 Jan 15 17:28:03
Stocks Trending Now: http://t.co/3At6WLra8p $TALN $GJH $STIA $SNXZF $NMKC $QQQX $EMMCF $ENDP $MDSI $GNMLF $RWMI $ICABF ~
Stockaholics
27 Jan 15 15:58:49
Our Penny Stock Picks Gained 968% In 5 Weeks! Get Our Next Pick Early: http://t.co/yQwzgQ7fmA $HLF $NUS $ENDP
MAISA
27 Jan 15 15:50:04
$ENDP will use $1.2B CASH to finance its acquisition of $AUXL pursuant to a merger of Avalon Merger Sub - Sorry $BDSI
MAISA
27 Jan 15 15:46:24
$ENDP $1.2B aggregate principal amount of 6.00% Senior Notes due 2025 -- WOW huge CASH..it means a good chance $ENDP will buy $BDSI? :)
mHealth Reporter
27 Jan 15 14:30:48
RT @BV_Healthcare: $ENDP Endo International Ltd files Form 8-K (Events or Changes Between Quarterly Reports) SEC Filing.. http://t.co/9Lo3a…
BV Healthcare
27 Jan 15 14:29:08
$ENDP Endo International Ltd files Form 8-K (Events or Changes Between Quarterly Reports) SEC Filing.. http://t.co/9Lo3aUsuMI
Stock Rocket
27 Jan 15 12:16:48
Our Penny Stock Picks Gained 968% In 5 Weeks! Get Our Next Pick Early: http://t.co/wMEn6i1tkM $HLF $NUS $ENDP
John George
27 Jan 15 10:24:39
Merger mania not slowing down: Auxilium stockholders approve $2.6B sale to Endo. $endp $AUXL http://t.co/mFrPfuRY91 via @PHLBizJournal
StockNewsWires
27 Jan 15 09:46:03
$AUXL $ENDP: Auxilium stockholders approve $2.6B sale of company to Endo: http://t.co/66EVKfsw4T
Penny Stock Secret
27 Jan 15 09:37:05
This Guy Turned $100 into over $10,000 In Just 30 Days! http://t.co/vezCDY95do .. $HLF $NUS $ENDP
DealPointData - M&A
27 Jan 15 09:17:50
Auxilium $AUXL shldrs voted to approve the merger with Endo International $ENDP with 84% of the total shares outstanding voting in favor
Ticker Report
27 Jan 15 08:56:43
Endo International plc – Receives $82.07 Average PT from Analysts $ENDP http://t.co/JCkvIumwSY
Battleflag
27 Jan 15 08:44:00
$akrx $endp $rgen $bfr - nice flags
China Trader
27 Jan 15 08:17:10
Why Trader’s Are Watching: Kingold Jewelry $KGJI, $VRML, $ENDP, $PFE, $WETF http://t.co/125cOHeyml
WKRB News
27 Jan 15 07:19:27
Endo International plc – Lifted to Outperform at Zacks $ENDP http://t.co/sag7U1mVZY
smart-ticker.com
27 Jan 15 06:11:59
Pre market top Stocks trade ideas: $SWY $ENDP $MWV $BKD $COV $INFA $RKT $AXS $PRE $STX more http://t.co/9RdQi0aTkA
Stock Rocket
27 Jan 15 00:09:43
Our Penny Stock Picks Gained 968% In 5 Weeks! Get Our Next Pick Early: http://t.co/wMEn6i1tkM $HLF $NUS $ENDP
leahanne
26 Jan 15 18:55:33
Volume Alert - ENDP 79.15 Endo Pharmaceuticals Holdings Inc $ENDP Hit a high today of 80.30 Closing the day 01 http://t.co/MAbpTYbCQL
leahanne
26 Jan 15 18:55:11
$ENDP Volume Alert - ENDP Stock 79.15 Endo Pharmaceuticals Holdings Inc $ENDP Hit a high today of 80.30 Closing the http://t.co/p4NBoY36VQ
Stock Rocket
26 Jan 15 16:35:05
Our Penny Stock Picks Gained 968% In 5 Weeks! Get Our Next Pick Early: http://t.co/wMEn6i1tkM $HLF $NUS $ENDP
Market Int Center
26 Jan 15 11:53:14
Endo Pharmaceuticals $ENDP Showing Bullish Technicals With Support At $77.02 ( http://t.co/RcqJegIobC )
InterCooler
26 Jan 15 09:05:28
Endo International plc – Rating Increased to Outperform at Zacks $ENDP http://t.co/Q1Y2ROFZhO
Joseph Fahmy
26 Jan 15 08:42:27
Continued strength in generic drug makers: $ENDP $ACT $MYL $MNK
InterCooler
26 Jan 15 07:33:43
Endo International plc – Assigned “BB” Credit Rating $ENDP http://t.co/kOWfEyKkdc
Samuel Brown
26 Jan 15 07:31:39
$ENDP Short Interest of Endo International plc Ordinary Shares Increases by 9.3% http://t.co/ZlTwsC6knp
StockNewsWires
26 Jan 15 04:51:06
$ENDP: Trimel Announces Filing of NATESTO(TM) With Health Canada: http://t.co/dnM9FNeQVW
Penny Stock Secret
25 Jan 15 21:53:52
This Guy Turned $100 into over $10,000 In Just 30 Days! http://t.co/vezCDY95do .. $ENDP $NXTM $WWD
Stock Rocket
25 Jan 15 12:28:18
Our Penny Stock Picks Gained 968% In 5 Weeks! Get Our Next Pick Early: http://t.co/wMEn6i1tkM $HLF $NUS $ENDP
Stock Rocket
25 Jan 15 07:30:31
Our Penny Stock Picks Gained 968% In 5 Weeks! Get Our Next Pick Early: http://t.co/wMEn6i1tkM $HLF $NUS $ENDP
TickerChirp
25 Jan 15 07:30:20
Popular Tweets Relevant to $ENDP (Endo Health Solutions symbol ENDP) on 01/25/2015 http://t.co/0iPhk2VNFT
Stock Rocket
25 Jan 15 00:21:11
Our Penny Stock Picks Gained 968% In 5 Weeks! Get Our Next Pick Early: http://t.co/wMEn6i1tkM $HLF $NUS $ENDP
				
				
By  +Follow August 26, 2013 9:15AM
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