Thursday, July 30, 2015

H&S top in Huntsman (HUN)

Here is the 6-year weekly chart of HUN:

Next is the 2-year daily chart showing a massive 22-month Head & Shoulders Top:

As always, don't chase. If we wish to short this set-up, we could wait for rallies to the $21 level and set our stop somewhere around $22. Such an entry has a more favorable reward-to-risk ratio than hastily shorting around $19 - but that's just one possibility. We need to determine our risk tolerance and comfort level. It is always best to err on the side of caution.

What if there are no retests of the neckline that give us a more favorable entry spot? Then let this trade go. There will be many more opportunities. Stay patient. 

And, of course, every pattern - no matter how well-defined and textbook, can fail. We must respect our stops and move on when a pattern fails and becomes something else.

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