 Hello and welcome to the chart of the week video with me David Badden. Today's date is Thursday the 28th of March 2019 and the time has just gone 1100 GMT 11 a.m. Here in London the chart of the week this week is going to be the Euro stocks 50 and This why I selected this market is because we could potentially be in About to create a head and shoulders reversal pattern on the Euro stocks 50 chart Now before we get into the actual Euro stocks 50 itself Let's just take a quick look at a textbook example of what a head and shoulders reversal reversal pattern is If you take a look here on the chart The head and shoulders pattern is defined as a series of higher highs and higher lows So the market pushes to the upside we can see the market creates another higher high here It pulls back to a reaction low Then the market plus creates another higher high and then it pushes lower yet again And in this and they kind of textbook example of a head and shoulders pattern The low that pulls back to here is similar to the low here And if you draw a line between those two lows here We call that the neckline and then the market bounces off the neckline pushes higher again but on this occasion the height The push to the upside fails to take that not only is a fail to take out the previous high which what we call the head It's also about a similar height to the previous high as well So this would be tentative. This is what's called the left shoulder. This is the head and this is the right shoulder Then the market pushes to the downside And once they have a break of the neckline that could be your sign We are potentially looking to move to the downside now It's some head and shoulders patterns when it does play out on some occasions when the market breaks below the neckline It'll often go a few points below the neckline and then retrace to the neckline again Before pushing to the downside before having an aggressive sell-off now One of the advantages of the head shoulders pattern is that if it does if it is to be a head shoulders pattern It can often give us a handy price target or a rough price target to aim for And how that is achieved is we take a look at the We take we take a look at the at the level that the head was at We know that down and we take a we take a reading over the neckline is that and we ascertain the price difference between the two so You essentially get the price difference of the head and the neckline And then you project that downwards from the break of the neckline And that that can often be seen as a good guidance For your price target in terms of where to look for Now that we've actually looked at the Textbook example of what a head and shoulders person pattern is let's take a look at the chart of the euro stocks 50 So the market has been bouncing back since December The market has pushed to a multi month high here in early March This could potentially be the formation of the left shoulder The higher high the market triffs lower to the reaction low pushes higher again creating another Higher high and hitting another a multi-month high. This is potential to be the head Which comes into play at 34 22 the market triffs lower doesn't get quite down to the lows That this reaction moment, but not too far away from it Marker has pushed higher yet again But we were still haven't gotten as high as the as the as the most recent eye So this has the potential to be that the the right shoulder now We the market we were yet yet to figure out which way the markets go to go But just keep in mind if the market does manage you to turn over on itself yet again And if it does manage to take off this level here the neckline which comes into play at 32 73 Break below that neckline could be a sign that it in fact it is in fact a head shoulder versus a pattern And as we just discussed a second ago, we could be looking at a Quite a substantial move to the downside if you measure the gap between That would be that's potentially the head here the top here 34 22 on this level here the neckline in at 32 73 at the price difference of 149 points so if this is to be a head shoulder versus a pattern We could be looking at breaking 149 points below the neckline here And that would bring us down to a price target of in around 31 24 now as I was saying on the When I was looking at the textbook example of the head and shoulders pattern It's often common to see a break below the neckline a return to the neckline Then for potentially a move to the downside again Now it isn't just to be clear. You can't you can't actually unless we actually have a break of the neckline We actually it we can't be it cannot be confirmed as a head shoulder versus a pattern So we really need to see that break Now if I'm wrong and if it's not a break I mean if it's not if it's not a head shoulder the rest of pattern It is worth pointing out that the euro stocks 50 has been a solid upward trend for over three months We see the light series of higher highs and higher lows So if this market does manage to press on higher from here We could be looking at retesting the kind of speaks like a large number of 3400 and we'll be on that could take this potential to bring the the mid-march high of 3422 and to play I should we go beyond that we could be looking at our getting 3460 we can see here that 3460 active support in early August and actually are active at positions in late August and The late September high nearly got as high as 3460 So depending on what the price action does whether we push on higher from here Or whether we have another move to the downside and break before Potentially break of the trend line of that of that neckline rather That will actually determine which potentially gives an indication of which way the market is going to go One last thing before I finish up if you have any comments to make in this video or any of the other videos We've met here at CMT markets. 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