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I cut my stock market analysis teeth on this and maybe I am late in
the thread. But there is a very interesting article in the April '02
edition of TA of Stocks and Commodities by Martin Boot.
Summation:
Using a data base of 8,315 NYSE and Nas stocks from '97 to '01
results indicated:
1. H&S occurs frequently
2. 35% of the occurrences are profitable.
3. The largest profit comes within a 4 week time frame. After 12
weeks the average profit drops below the profit of the first week.
The above are the most salient features of the research although
there is more.
The conclusion of the article is that H&S can be helpful in
determining trendline breakouts. However simply identifying them will
not provide a high success rate.Knowing the phase of the cycle in
which the formation occurs can turn the H&S into a "goldmine" This
last comment leans heavily on the work of Merrman who identified the
cycles and morphology of H&S.
Hope this was not redundant.
John
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