BHP – Head and Shoulder Buy

Technical traders may be interested in the fact that Friday’s strong rally in commodity prices looks like setting BHP up for a head and shoulders buy today.

Daily Chart

A successful head and shoulder set up here looks as though it could lead to a corrective rally in BHP.

BHP CFD - Daily. Source CMC Tracker.

BHP CFD – Daily. Source CMC Tracker.

Trading Strategy

 The strategy outlined on the chart above would be one approach to the head and shoulders pattern from a medium term trader’s perspective. It involves:

  • Buying on a confirmed break above the neck line (some may wait for a close above this level as confirmation
  • Setting an initial profit objective based on the “measuring technique”.  This measures the distance from the “head” to the point on the “neckline” vertically above the head. This distance is then projected from the point on the neck line where price breaks out.
  • Placing an initial stop loss under the minor support at the dashed red line
  • Moving the stop up behind any successful re- test of the neckline 
  • Starting to trail the stop higher once price reaches 61.8% of the distance from the neck line to the profit objective.

About Ric Spooner

Over 30 years market experience - professional trader, broker, director
This entry was posted in Commodity, Market, Shares, Stocks, Trading and tagged , , , , , . Bookmark the permalink.

3 Responses to BHP – Head and Shoulder Buy

  1. Ahmet says:

    Is this not a bearish head and shoulder ? You need a reverse h/s for a buy seal don’t you

    • Ric Spooner says:

      Hi Ahmet,

      This one is an “inverse” head and shoulder and a bullish/buy set up. In this case there is a good downtrend leading into the whole pattern and then the head and shoulders are upside down with the head below the 2 shoulders.
      The normal head and shoulders is a bearish formation. It sits at the top of an uptrend and looks like a normal head and shoulder with the head above the 2 shoulders
      I hope this helps

      Regards
      Ric

  2. Tim says:

    Hi, Ric
    looking at indicators and a close above the 35ma is also indicating a buy i think this head and shoulder will turn fruitful

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