Seasonal guru Don Vialoux mentioned on his blog today that the TSX may be making a head and shoulders topping formation. Below is a daily chart of the TSX with notations. The TSX may be putting in a complex H&S Top. Complex H&S patterns are identified by multiple shoulder formations – in the current case, the double left shoulder of the formation. From my perspective, the formation has not broken its neckline, which is necessary to project a downside target. It appears that the neckline for this formation, should it prove to be a valid top, lies around 15,300.
If, and only if, the neckline breaks, I’d suggest a downside target between 14,800 and 14,500 for the TSX given the prior trading zone for the index. Coincidentally this lines up with the traditional way of measuring a H&S topping target by measuring the peak of the head to the neckline- and then subtracting that again from the neckline. The head’s peak was around 15,900, which gives us 600 points to the neckline. That’s going to suggest a “measured move” downside target of 14,700. Again though, it’s not a top until the neckline breaks.
Crude oil shows some interesting patterns. The daily chart below shows us that crude has been in a wide swinging uptrend, but just broke its 200 day MA. The prior low of around $42.50 has not been violated, suggesting the main trend remains intact. Momentum indicators are oversold.
Meanwhile, WTI crude oil is displaying a longer termed pattern suggesting possible bullish tones. WTI seems to have been forming a reverse (bottom) H&S pattern since 2015. On the weekly chart, WTI needs to break its neckline of around $55 before we can expect a bullish upside target to be achieved. I’ve noted in the past a target of $62 in a prior blog, but a measured move target of $27.50 (low of the head) to the neckline ($55) suggests well over $30 upside from the $55 neckline, should that break occur.
So, Head & Shoulders patterns abound. Keep your head on straight, and you may just shoulder some profits should you trade these breakouts properly.