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These tops are very rare nowadays due to how the giant Buy Side Institutions using Alternative Trading Systems, slowly sell out of a stock long before it runs up speculatively. The Head & Shoulders formation peak fails to form very often, as High Frequency Trading triggers massive collapsing sell offs on sudden news events. Since High Frequency Trading is mostly one day events the "Head" that used to form no longer does, because there is no continuation after the huge one day volume surge and price speculative intraday action.
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Topping Candlestick Pattern Formations on the 3 Trend timeframes of Long-Term, Intermediate-Term, and Short-Term are caused by different Fundamental situations. Here are explanations of those situations:
Tops are caused by short-term trading action. Market Tops as opposed to individual Stock Tops, can take quite a bit of time to form. Individual stocks can often top rather rapidly. Contrarian indicators will show extreme readings prior to Market Tops for 2-4 months or longer, before the Market Top actually occurs. This is because of the buying that takes place as a top forms. Individual stocks will show nearly vertical trendlines if the buying that caused the top has become irrational without solid basis, and is therefore pure gambling with get rich speculation.
Contrarian views are tough for beginners. It is really hard to jump onto the river bank of fast flowing trading and emotion. No one likes to be the lone man out. That is why most highly successful traders are loners, and do not participate in group chat rooms. You have to be able to make a call or decision and stick with it, even when others think you are wrong. Contrarian also only works when the market goes to an extreme. It does not work when the market is slightly overbought or slightly oversold. It has to be an extreme.
The TechniTrader Beginner Webinar Lessons is a good place to start learning about trading in the Stock Market.
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