The head and shoulders is one of a group of patterns typically considered trend reversal chart patterns. But occasionally prices will go through a series of fluctuations that form an inverted H&S pattern that leads to continuation of the previous trend.
A H&S that develops in a declining market will take the form of a H&S top. By the time these price formations are completed (left shoulder, head and right shoulder) there is no question as to their implications. Irrespective of the name given to this consolidation chart pattern, the most important technical point to highlight is the several tests of the horizontal boundary. After several tests, the chart pattern is mature and ready for a breakdown.
Over the past year XRP/USD price chart has been in a downtrend. In the second half of 2018, XRP/USD formed a sideways consolidation below its long-term average (1 year average). I use year-long average as a trend filter. Price action that is below the long-term average signals weakness. Price action above the long-term average shows strength and I consider it as an uptrend. Latest consolidation failed to break above the long-term average. The price formed a possible bearish H&S continuation chart pattern with the horizontal boundary acting as support at 0.27 levels. After several tests of the horizontal boundary a breakdown below 0.27 levels can send prices lower towards the possible chart pattern price target at 0.13 levels. Strong resistance formed by both the year-long average and the upper boundary of the trend channel stands at 0.45 levels. Only after a reversal above the long-term average at 0.45 levels the technical outlook will shift to positive.
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