The problem with well known technical patterns

Rev Shark ...

A lot of folks have been pointing at developing head-and-shoulders top patterns in a number of indices as a reason to be worried. I certainly can see what they are talking about, as can just about anyone else who looks at the chart.

However, it is my experience that it is a pattern that seldom works. I would guess that the head-and-shoulders pattern is probably the most well known of all technical patterns, which is why it doesn't tend to work that well.

When everyone sees and expects the same things, they act in anticipation. The sellers who are worried about a head-and-shoulders top do their selling before it is fully formed, which tends to undercut its development.

We see the same problem with breakouts at times as well. When they are well anticipated, they are often sold and fail. Technical patterns can't be considered in a vacuum. You also have to think about the emotions that surround them. When anticipation that a particular pattern may play out is running very hard, the chances of a quick failure are also high.