I made a big mistake. I was under the impression that Head and Shoulders was a “bearish” pattern, when in fact it may depend on the preceeding trend. Jon, from the Fickle Trader pointed this misunderstand (okay – let’s be honest – my ignorance):
If there is no preceding trend, then why should we expect a trend reversal? If you are looking for price declines after the head and shoulders pattern completes, you need to identify the conditions where the stock has a preceding uptrend on the same timeframe as your h&s pattern.
Oooooooops. He also says:
For the purposes of head and shoulders analysis, I recommend we define a prior uptrend as a series of higher highs and higher lows (you can identify this with correlation too).
Dang it – I messed up that last experiment in looking at head and shoulders, so we will re-do it to see what difference it makes. Thanks for pointing out my, uh, ignorance!