Head and shoulders: counted over ten years
Head and shoulders
| Instrument | Found | Counted | Hit | Miss | Undecided | Hit share | Average result, ATR |
|---|---|---|---|---|---|---|---|
| Reliance Industries | 0 | 0 | 0 | 0 | 0 | — | — |
| HDFC Bank | 0 | 0 | 0 | 0 | 0 | — | — |
| ICICI Bank | 0 | 0 | 0 | 0 | 0 | — | — |
| Infosys | 1 | 1 | 0 | 1 | 0 | 0.0% | -1.29 |
| Tata Consultancy Services | 0 | 0 | 0 | 0 | 0 | — | — |
| State Bank of India | 2 | 2 | 0 | 2 | 0 | 0.0% | -1.37 |
| ITC | 0 | 0 | 0 | 0 | 0 | — | — |
| Larsen & Toubro | 0 | 0 | 0 | 0 | 0 | — | — |
| Axis Bank | 1 | 1 | 0 | 1 | 0 | 0.0% | -2.22 |
| Bharti Airtel | 1 | 1 | 0 | 1 | 0 | 0.0% | -1.57 |
| Nifty IT | 1 | 1 | 1 | 0 | 0 | 100.0% | +2.02 |
| All instruments | 6 | 6 | 1 | 5 | 0 | 16.7% | -0.97 |
| Any session, same test, textbook direction down | 26729 | 7432 | 27.8% |
head and shoulders: the definition above applied to every occurrence the rule found. Shares are hits divided by counted.
- Up session (close above open), hollow
- Down session (close below open), filled
- Line of the figure
- Target level
- Cancel level
- Span of the figure
- Breakout close
The rule that found it
Rule HS-1: five alternating pivots high-low-high-low-high; the middle high (the head) clears both shoulders; both shoulders stand 0.5 to 0.9 of the head's height above the neckline; the shoulders differ by at most 0.25 of that height and so do the two troughs; the figure spans 20 to 120 sessions and is at least 5 ATR high; the left shoulder came after a rise of at least one figure-height inside the 80 sessions before it; it counts as formed only when a session closes below the neckline (the line through the two troughs, extended) within 30 sessions after the right shoulder, with no close above the head in between.
Rule HIT-IN: a figure found by its written rule is counted at the close that completes it (for a candle model, the close of its last candle). From that close C, and the ATR of that session, the textbook direction follows from the figure: down for head and shoulders, double top, descending triangle and bearish engulfing; up for double bottom, ascending triangle and bullish engulfing. It is a hit if one of the next 20 sessions closes at least 2 ATR from C in that direction before any session has closed 1 ATR or more from C the other way. It is a miss if a close 1 ATR against comes first. If neither happens within 20 sessions it is undecided and counts as not a hit: it stays in the denominator. Only closes decide, never highs or lows. A figure with fewer than 20 sessions of history after it is left out and counted separately. The result of an occurrence is the distance from C to the close that decided it (or to the 20th close), in ATR, positive in the textbook direction.
- Up session (close above open), hollow
- Down session (close below open), filled
- Line of the figure
- Target level
- Cancel level
- Span of the figure
- Breakout close
The rule that found it
Rule HS-1: five alternating pivots high-low-high-low-high; the middle high (the head) clears both shoulders; both shoulders stand 0.5 to 0.9 of the head's height above the neckline; the shoulders differ by at most 0.25 of that height and so do the two troughs; the figure spans 20 to 120 sessions and is at least 5 ATR high; the left shoulder came after a rise of at least one figure-height inside the 80 sessions before it; it counts as formed only when a session closes below the neckline (the line through the two troughs, extended) within 30 sessions after the right shoulder, with no close above the head in between.
Rule HIT-IN: a figure found by its written rule is counted at the close that completes it (for a candle model, the close of its last candle). From that close C, and the ATR of that session, the textbook direction follows from the figure: down for head and shoulders, double top, descending triangle and bearish engulfing; up for double bottom, ascending triangle and bullish engulfing. It is a hit if one of the next 20 sessions closes at least 2 ATR from C in that direction before any session has closed 1 ATR or more from C the other way. It is a miss if a close 1 ATR against comes first. If neither happens within 20 sessions it is undecided and counts as not a hit: it stays in the denominator. Only closes decide, never highs or lows. A figure with fewer than 20 sessions of history after it is left out and counted separately. The result of an occurrence is the distance from C to the close that decided it (or to the 20th close), in ATR, positive in the textbook direction.
The written rule found 6 head and shoulders tops in ten years of daily history across 11 instruments. Under this site's definition, 1 of 6 was a hit: 16.7 percent against a yardstick of 27.8 percent for the same test from any session. Six is a very small number, and this page says what it can and cannot support.
The rule
Rule HS-1 looks for five alternating pivots, high-low-high-low-high. The middle high, the head, clears both shoulders; both shoulders stand 0.5 to 0.9 of the head's height above the neckline; the shoulders differ by at most 0.25 of that height, and so do the two troughs; the figure spans 20 to 120 sessions and is at least 5 ATR high; and the left shoulder came after a rise of at least one figure-height in the 80 sessions before it. It counts as formed only when a session closes below the neckline, the line through the two troughs, within 30 sessions after the right shoulder, with no close above the head in between.
The hit is then judged from that closing session by the site's single definition: a close 2 ATR lower within 20 sessions before a close 1 ATR higher. The textbook's measured move, the head's height projected down from the neckline, is not used.
What the table says
Of the six occurrences, one was a hit and five were misses, none undecided. That is 16.7 percent, against 27.8 percent for the same downward test from any session. By instrument: Infosys one miss, State Bank of India two misses, Axis Bank one miss, Bharti Airtel one miss, and Nifty IT one hit. Reliance, HDFC Bank, ICICI Bank, TCS, ITC and Larsen & Toubro had no head and shoulders by this rule.
The average result, the distance from the completing close to the deciding close in the textbook direction, was -0.97 ATR: on average the close that decided each occurrence stood about one ATR on the wrong side. The one hit just reached its target, at +2.02 ATR.
Six is not enough to conclude
With six occurrences, a single result changes the share by 16.7 points: five hits of six would read 83 percent, none would read zero. The yardstick of 27.8 percent lies well inside what a handful of coin-flips could produce. So the honest reading is narrow. On these 11 instruments, over ten years, this written rule found few head and shoulders tops, and most of them did not fall 2 ATR before rising 1 ATR. That is a description of six events.
It does not show that the pattern fails, and it does not show that it works. A larger count would need more instruments or a longer history, and a looser rule would find more figures that are less clean. The page reports the count the rule gave and does not adjust it.
The two drawn examples
The chart under the heading shows both. The hit is Nifty IT, completed on 2 May 2022 at a close of 31,138.80 with an ATR of 750.95; on 13 May a close came 2.02 ATR below C, just past the 2 ATR target. The miss is Bharti Airtel, completed on 12 January 2023 at 756.90 with an ATR of 22.95; a close 1.57 ATR above C came on 3 February, before any close 2 ATR below. Both candle series are real and both examples are counted in the table.
The pair was picked as one example of each outcome from the occurrences the rule found, the cleanest of each by the rule's own measure, not for how it ended.
At a glance
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Questions about the count
How many head and shoulders tops were found?
Six, on five of the 11 instruments, in ten years of daily history: Infosys, State Bank of India (two), Axis Bank, Bharti Airtel and Nifty IT.
How many were hits?
One, on Nifty IT. Five were misses. None was undecided.
Is that enough to judge the pattern?
No. Six occurrences move the share by almost 17 points per result. The count is reported as it came, and it supports no conclusion about the pattern in general.
Is the textbook measured move used?
No. A hit is scored by the site's fixed definition, 2 ATR within 20 sessions before 1 ATR against, not by the head's height projected from the neckline.
What is the yardstick?
The same downward test run from every session of the same histories passed 27.8 percent of the time.
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