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Head-and-Shoulders Pattern to Top 4-Month Trend in EUR/USD?

January 19, 2020 (Last updated on February 7, 2020) by

The current chart formation on the daily chart of the EUR/USD currency pair looks like an inclined head-and-shoulders pattern. It caps the minor uptrend, which is active since early October, 2019. As a head-and-shoulders is a reversal pattern, a confident breakout through the neckline could spur a bearish trend in EUR/USD here.

The inclined long yellow line on the image below marks the pattern’s neckline (upper line). The short yellow lines mark the shoulders and the head. The entry level is highlighted with the cyan line, which is placed at 10% of the pattern’s height subtracted from the neckline. My potential take-profit level will be placed at the green line, which is situated at 100% of the pattern’s height below its neckline. I will set my stop-loss level to the high of the breakout candle or to the high of the preceding candle if the breakout one trades mostly below the neckline. I will ignore bullish breakouts from this head-and-shoulders formation. You can click on the image to see a bigger chart.

EUR/USD - Head-and-Shoulders Pattern on Daily Chart as of 2020-01-19

The chart was built using the ChannelPattern script. You can download my MetaTrader 4 chart template for this EUR/USD pattern. It can be traded using my free Chart Pattern Helper EA.

Update 2020-01-20 17:45 GMT: EUR/USD continued to fall during the Monday session and has hit my sell stop’s entry rate of 1.10805 about 4 hours ago. The stop-loss level is 1.11420 and the take-profit order is at 1.09294 right now. Unfortunately, the breakout looks rather timid:

EUR/USD - Head-and-Shoulders Pattern on Daily Chart - Post-Entry Screenshot - as of 2020-01-20

Update 2020-02-07 10:44 GMT: After posting a strong pullback wave at the end of January, EUR/USD has hit my take-profit level at 1.09546 just less than an hour ago:

EUR/USD - Head-and-Shoulders Pattern on Daily Chart - Post-Exit Screenshot - as of 2020-02-07

If you have any questions or comments regarding this head-and-shoulders pattern on the EUR/USD chart, please feel free to submit them via the form below.

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