The AIQ code for finding head & shoulders (H&S) patterns based on Giorgos Siligardos’ article in the May issue of Stocks & Commodities, “Head & Shoulders, Algorithmically (Part 2),” is provided at the following website: www.TradersEdgeSystems.com/traderstips.htm.

I did not directly translate the code given in Siligardos’ article into AIQ EDS code because the AIQ program has chart pattern recognition built in. The code I am providing will find H&S patterns — as well as many other patterns — for either completed or emerging patterns.

In Figure 5, I show an example of a completed H&S topping pattern with the sell signal (red down arrow). The bars after the signal indicate that this trade was immediately profitable. In Figure 2, I show an example of a completed inverse H&S bottoming pattern with a buy signal (red up arrow). The bars after the signal indicate that this trade was immediately profitable.

The code and EDS file can be downloaded from www.TradersEdgeSystems.com/traderstips.htm, and is shown below.

!DETECTING HEAD & SHOULDERS ALGORITHMICALLY
!Author: Giorgos E. Siligardos TASC May 2013
!Coded by: Richard Denning 3/17/2013
!USER DEFINED FUNCTIONS:
C is [close].
Name is description().
!COMPLETED HEAD & SHOULDERS PATTERN-TOPPING:
HS is [Head and Shoulders].
HS_breakoutup if HS > 0.
HS_breakoutdn if HS < 0.
!COMPLETED HEAD & SHOULDERS PATTERN-INVERTED:
iHS is [Inv Head and Shoulders].
iHS_breakoutup if iHS > 0.
iHS_breakoutdn if iHS < 0.
!EMERGING HEAD & SHOULDERS PATTERN-TOPPING:
e_HS is [eHead and Shoulders].
e_HSemerge if e_HS > 0 or e_HS < 0.
!EMERGING HEAD & SHOULDERS PATTERN-INVERTED:
e_iHS is [eInv Head and Shoulders].
e_iHSemerge if e_iHS > 0 or e_iHS < 0.
!REPORTS TO LIST ALL HEAD & SHOULDERS PATTERS:
ShowAll if C>0 and (HS <> 0 or iHS <> 0 
or e_HS <> 0 or e_iHS <>0).

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MACD divergence is a tried and tested technical tool. If you look at the daily price chart of Verizon below, you can clearly see the recent high on 4-12-2013. Note the MACD is well below the indicator peak back in the middle of March.