This paper evaluates rigorously the predictive power of the head-and-shoulders pattern as applied to daily exchange rates. Though such visual, nonlinear chart patterns are applied frequently by technical analysts, our paper is one of the first to evaluate the predictive power of such patterns....

This paper identifies a specific set of agents as noise traders in U.S. equity markets, and examines their effects on returns. These agents, who speculate using the quot;head-and-shouldersquot; chart pattern, are shown to qualify as noise traders because (1) trading volume is exceptionally high...