To review a current H&S pattern on Tesoro’s stock, please take a look at the 1-year chart of TSO (Tesoro Corporation) below with my added notations:
TSO had rallied from a low of $35 in November to a peak of $65 in May. Over the last (6) months the stock had created a very important level of support at $50 (purple), which was also the “neckline” support for the H&S pattern. Above the neckline you will notice the H&S pattern itself (blue). Confirmation of the H&S occurred yesterday when TSO broke its $50 “neckline” support. So, the stock should be moving lower overall from here.
Keep in mind that simple is usually better. Had I never pointed out this H&S pattern, one would still think this stock is moving lower simply if it broke below the $50 support level. In short, whether you noticed the pattern or not, the trade would still be the same: On the break below the key $50 level.
The Tale of the Tape: After embarking on a nice rally higher, TSO confirmed a head & shoulders pattern. A short trade could be placed now, or could be entered on any rallies up to or near the $50 area.
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