Replies to post #44360 on Short Term Trading Member Forum

[Chuck703VA]

Bliss, but it does qualify, or at least it is not disqualified, imho....

In reading your link the following words are there.....

"Volume is highest when the left shoulder is forming. In fact, volume is often expanding as the uptrend continues and more and more buyers want to get in.

Volume is lowest on the right shoulder as investors see a reversal happening. Experts say low volume levels on the right shoulder are a strong sign of a reversal."

Vol is highest......left..is forming. ok

In fact, vol is often expanding as the uptrend continues and more and more buyers want to get in...... I interpret this to be speaking of the uptrend continuing into the head.

Vol is lowest on the right shoulder ......agreed, but it increases after the neckline is broken often when the ship is evacuated.

Now, that's just my interpretation, so I went back to the book I first bought in the 60's/early 70's as recommended by my broker as he thought I would be interested in technical analysis. "Technical Analysis of the Stock Market" by Edwards and Magee. I have the ninth printing in 1973.

A lot of print is dedicated to H&S formations. On page 53 is the following statement about volume.
"Roughly estimated, about one third of all confirmed Head-and-Shoulder formations show more volume on the left shoulder than on the head, another third show about equal volume, and the final third show greater volume on the head than on the left shoulder.

Lastly I went to a more recent book by Murphy. "Technical Analysis of the Financial Markets. John J. Murphy. He says...
"As a general rule, the second peak (the head) should take place on lighter volume than the left shoulder. This is not a requirement, but a strong tendency and an early warning of diminishing buying pressure. The most important volume signal takes place during the third peak (the right shoulder). Volume should be noticeably lighter than on the previous two peaks. Volume should then expand on the breaking of the neckline, decline during the return move, and then expand again once the move is over.

I have not find anything that limited the amount of slope in the neckline but did find a comment that a downslope in the neckline could indicate a weaker situation. Who knows......I just wanted to point out that I don't think your source is violated.