EURUSD One Pager Report Formation of Head & Shoulder Pattern Formation

Trading Call: EURUSD Sell CMP @ 1.3040 Stop Loss of 1.3250 closing basis Target of 1.2800 – 1.2200 – 1.1750 levels.

As its name implies, the Head and Shoulders reversal pattern is made up of a left shoulder, a head, a right shoulder, and a neckline. Other parts playing a role in the pattern are volume, the breakout, price target and support turned resistance. We will look at each part individually, and then put them together with some examples.

As its name implies, the Head and Shoulders reversal pattern is made up of a left shoulder, a head, a right shoulder, and a neckline. Other parts playing a role in the pattern are volume, the breakout, price target and support turned resistance. We will look at each part individually, and then put them together with some examples.

1. Prior Trend: It is important to establish the existence of a prior uptrend for this to be a reversal pattern. Without a prior uptrend to reverse, there cannot be a Head and Shoulders reversal pattern (or any reversal pattern for that matter).
2. Left Shoulder: While in an uptrend, the left shoulder forms a peak that marks the high point of the current trend. After making this peak, a decline ensues to complete the formation of the shoulder (1). The low of the decline usually remains above the trend line, keeping the uptrend intact.
3. Head: From the low of the left shoulder, an advance begins that exceeds the previous high and marks the top of the head. After peaking, the low of the subsequent decline marks the second point of the neckline (2). The low of the decline usually breaks the uptrend line, putting the uptrend in jeopardy.
4. Right Shoulder: The advance from the low of the head forms the right shoulder. This peak is lower than the head (a lower high) and usually in line with the high of the left shoulder. While symmetry is preferred, sometimes the shoulders can be out of whack. The decline from the peak of the right shoulder should break the neckline.
5. Neckline: The neckline forms by connecting low points 1 and 2. Low point 1 marks the end of the left shoulder and the beginning of the head. Low point 2 marks the end of the head and the beginning of the right shoulder. Depending on the relationship between the two low points, the neckline can slope up, slope down or be horizontal. The slope of the neckline will affect the pattern's degree of bearishness—a downward slope is more bearish than an upward slope. Sometimes more than one low point can be used to form the neckline.
6. Volume: As the Head and Shoulders pattern unfolds, volume plays an important role in confirmation. Volume can be measured as an indicator (OBV, Chaikin Money Flow) or simply by analyzing volume levels. Ideally, but not always, volume during the advance of the left shoulder should be higher than during the advance of the head. This decrease in volume and the new high of the head, together, serve as a warning sign. The next warning sign comes when volume increases on the decline from the peak of the head. Final confirmation comes when volume further increases during the decline of the right shoulder.
7. Neckline Break: The head and shoulders pattern is not complete and the uptrend is not reversed until neckline support is broken. Ideally, this should also occur in a convincing manner, with an expansion in volume.
8. Support Turned Resistance: Once support is broken, it is common for this same support level to turn into resistance. Sometimes, but certainly not always, the price will return to the support break, and offer a second chance to sell.
9. Price Target: After breaking neckline support, the projected price decline is found by measuring the distance from the neckline to the top of the head. This distance is then subtracted from the neckline to reach a price target. Any price target should serve as a rough guide, and other factors should be considered as well. These factors might include previous support levels, Fibonacci retracements, or long-term moving averages.

EURO is showing Head & Shoulder Pattern formation and Neck Line is coming at 1.2750, sustain trading below 1.2750 will confirm the Pattern Formation where the height of the Head will be the expected target on lower side in this case will come to test 1.1750 level, this formation is only true till the time prices are sustaining below 1.3250 closing basis above which it becomes invalid pattern formation. 

Gold One Pager Report Expected tgt 1220 - 1160

Trading Call: XAU/USD Sell CMP @ 1464 Stop Loss of 1505 Target of 1320 – 1240 - 1160 levels.

Gold has retraced by 61.8% of the fall from the level of 1590 to 1321 and if the resistance of 1485 hold on closing basis reversal is expected from current level and will test immediate support of 1320$ and further trading below 1320 will bring to 1240 and 1160 on lower side.

We expect gold to fall by 161.8% of A-B from Point C which is the expected target of 1160$ on lower side.  On higher side till the time its below 76.4% retracement at 1525$ we expected this rise was just a pull back of the sharp selloff. Selling will continue from current level and further support of 1425$ and 1385$ can be seen immediately.

Market is in bearish trend and any level below 1200 – 1160 range will be the level to go long in market and it will enter in fifth wave in long term chart where some life time high level can be crossed in years to come.