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FURTHER USE OF TECHNICAL ANALYSIS -
There are a few additional TA techniques that, Weinstein suggests, need to be mastered in order to ‘fine-tune’ your buying (or shorting) decisions and the path the greater profitability.

When you read most books on technical analysis you are introduced to all sorts of formations and jargon which can serve only to confuse. Many of these will have some value but most of the fancy formations will have nothing to do with guiding you to make the right share selections. Although they do have their place, you can forget all about such things as saucer bottoms, pennants, flags, macd’s etc. but there are a few which will be of help to you and with which you should become conversant. These are, Weinstein suggests, as follows –

A) Head-and-Shoulders formation
This is one of the most powerful and reliable of all bottom (and top) formations. This dynamic pattern can appear after a share has suffered a major decline (or rise) and is ready to reverse, sharply, to the other side.The diagram below (in this case a bottom formation) shows what to expect –

Briefly - a rally follows a steep decline (point A); next there is another decline which takes the share down to yet another lower bottom. Then comes another rally which takes the price back up to about the same level as last time (point B).

Thus we now have a (potential) Left shoulder and a Head formed. Now another decline sets in but, this time, it doesn’t drop the share to a new low and, in fact, it forms a higher low (than the ‘Head’) for the first time and the share starts to rally once more.

Once the price breaks above the neckline you want to know about it as it is a strong bullish signal.

A cautionary note though; we must see the price above its MA and the MA must have turned upwards, otherwise we must leave the share alone.

Here are two examples of Head and Shoulder formations. On the downside look at the Corus (cs) chart; this was a super Short trade down from 72p all the way to 13p once the Head and Shoulders had given the signal.

Then look at Ashtead Grp (aht) on the Long side; here the trade went from 38p to 134 p after the Head and Shoulders (with all the other signals in place as well of course) –