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A New Recognition Algorithm for “Head-and-Shoulders” Price Patterns

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  • Chong, Terence Tai Leung
  • Poon, Ka-Ho

Abstract

Savin et al. (2007) and Lo et al. (2000) analyse the predictive power of head-and-shoulders (HS) patterns in the U.S. stock market. The algorithms in both studies ignore the relative position of the HS pattern in a price trend. In this paper, a filter that removes invalid HS patterns is proposed. It is found that the risk-adjusted excess returns for the HST pattern generally improve through the use of our filter.

Suggested Citation

  • Chong, Terence Tai Leung & Poon, Ka-Ho, 2014. "A New Recognition Algorithm for “Head-and-Shoulders” Price Patterns," MPRA Paper 60825, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:60825
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Technical analysis; Head-and-shoulders pattern; Kernel regression.;
    All these keywords.

    JEL classification:

    • G0 - Financial Economics - - General
    • G02 - Financial Economics - - General - - - Behavioral Finance: Underlying Principles

    Statistics

    Access and download statistics

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