Hello to my friends who love life and keep smiling despite all negativity. In this article, I will talk about the "Head and Shoulders Pattern (HEA)", the formation that informs you of the end of the rising trend in technical analysis in the cryptocurrency markets. I will try to explain it as simply as possible. Let's learn together…
Head And Shoulders Pattern indicates that the uptrend will end and a downtrend will begin. It is one of the terms that newcomers to the cryptocurrency markets have heard. What is Head And Shoulders Pattern?
It is a formation used to enter bear markets. It consists of 3 high peaks, the highest being the 'head' region in the middle.
Head And Shoulders Pattern is seen during trend conversion in bull markets.
What is the bull market? In short, it is the market where prices increase. The bear market is called the markets where new lows are seen where prices are constantly falling.
Formation consists of 4 stages
Stage 1; In the first phase of formation, when buyers are aggressive in a strong trend, more and more investors shape the market. Investors who want to make a profit after the strong peak movement of the formation will want to sell. This is because they try to maximize their benefits. This mobility of the formation constitutes the left shoulder part. Investors, who missed their profit in the previous wave after the decrease in the market due to price fluctuations, start buying, thinking that prices will decrease and rise again.
Stage 2; In the second phase of the formation, as the investors see the new trend values in the market, they make another peak in the head region of the previous peak with the power of new purchases, and profit sales begin to occur again in the head part. There is a decrease due to the fluctuation of prices, after the fall, prices come to the neck region. Investors assume that there is a re-emerging buying opportunity at this point and they start buying.
Stage 3; In the third stage of the formation, the buyers who cannot benefit from the left shoulder and head area think that the prices will peak again. However, due to the decrease in receptors, before reaching the peak, it makes a hill and declines again, and the right shoulder is formed. After this point, professional buyers start selling due to the deterioration of the trend due to the inability to pass the peak.
Stage 4; In the fourth stage of the formation, the neckline is very important in the final stage of the Shoulder head and shoulders formation, the price moves towards the support formed by the neckline. The late buyers who are panicked with the break of the support join the sale and the trend ends with a serious decrease.
The importance of the neckline in the formation is the support line, where the buying / selling decisions are made.
The chart above belongs to bitcoin. Right now, the whole market is wondering about the results of this pattern. At the time of writing the article, there is indecision for Bitcoin. The date of January 20 seems critical.
In finishing...
The Market Actions Behind the Head and Shoulders Pattern. Like all charting patterns, the ups and downs of the head and shoulders pattern tell a very specific story about the battle being waged between bulls and bears.
As I always said, listen to everyone, decide for yourself ...
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