Euro: Look at This Head & Shoulders Chart Formation
Learn about the "head and shoulders" measuring formula
by Bob Stokes
Updated: December 16, 2021
You are probably familiar with the classic "head and shoulders" chart pattern.
But, in case you need a refresher, here's a brief description of a head and shoulders top:
The high of an initial upward move is the left shoulder. After a decline, another upward move takes prices to a higher high, or the head. A second decline follows the head. A third rally then takes prices to a peak below the high of the head, and becomes the right shoulder. The left and right shoulders are often similar in duration and extent. A trendline connecting the two lows is called the neckline. When prices penetrate the neckline, a change of trend is believed to have occurred.
Head and shoulders bottoms also occur and the same description applies except in reverse.
This head and shoulders measuring formula -- showing a top as an example -- provides even more insight. The commentary is from a past issue of Elliott Wave International's Trader's Classroom:
To identify a high-probability price target for the move following the break of the Neckline, measure the distance between the Head and the Neckline and then project that distance down from the point at which the Right Shoulder breaks the Neckline.
Our July 2021 Global Market Perspective applied this knowledge to a forecast for the euro.
The chart on the left is from that July issue of the Global Market Perspective and the chart on the right was updated for our December Global Market Perspective. Here's what the December Global Market Perspective said:
A relentless four-month decline pulled the euro slightly below our downside target of $1.1263 on November 19, as these before-and-after charts show. On November 24, the euro bounced from its $1.1185 low...
Will the rally persist or is it about over?
You can get our forecast for the euro, in addition to more than 50 other financial markets in our Global Market Perspective.
Those "other markets" include major global stock indexes, cryptocurrencies, forex, rates, metals, energy and much more.
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