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The crown formation, which can occur at tops (bull crown) or bottoms (bear crown), is similar to the H&S, but the two patterns have important differences. The top of Figure 1 shows the classic H&S formation, in which pivot-low D and pivot-high E form at about the same level as previous comparable pivot points  and A.

In a bull crown pattern, pivot D extends below the previous pivot, forming a downswing that usually extends 1.272 times the previous leg up (B-C). Price then rallies .618 of the distance from Ñ to D-l, creating pivot E-l (see the pattern at the bottom of Figure 1). The formation of pivot D-l well below the previous pivot breaks the pattern's price symmetry and establishes momentum in the opposite direction. When price rallies to form E-l, it is actually making a normal .618 Fibonacci retracement before continuing lower. The degree of quantification and expectation provided by applying Fibonacci calculations gives the crown formation an edge over the standard H&S pattern.

Figure 2 (p. 62) shows a complete bull crown pattern. Most traders will still consider this an H&S-type pattern because, for the most part, they are only looking at the left and right shoulders (and, of course, the head in the middle). However, the fact that the pivot low after the right shoulder extends well below the pivot after the left shoulder (as much as 1.618 of the B-C upswing) improves the odds of an eventual downside reversal.

Bear crowns are equivalent patterns that occur after down moves and signal upside reversals. The relationship between the price swings is the same as that for bull crowns. For simplicity, the remainder of the article will discuss bull crowns.

The TICK/TIKI indicator

The TICK is a short-term (intraday) indicator that measures the bullish (upticking) or bearish (down-ticking) activity in NYSE stocks throughout the day. TIKI is the symbol for the same indicator calculated on Dow Jones Industrial Average (DJIA) stocks; some data services also calculate the TICK for Nasdaq stocks.

The TICK/TIKI is a breadth indicator that gives traders an intraday look at the "internal" strength or weakness of the market - that is, the strength or weakness beyond whether the overall market is up on a point or percentage basis. By comparing the number of stocks advancing to stocks declining, the indicator reflects the market's up or down momentum at a given moment. For example, if the DJIA index is up marginally but down-ticking stocks are consistently outnumbering up-ticking stocks (and the number of down-ticking stocks is increasing, reflected by a downtrending TIKI indicator), it is likely only a relative handful of strong stocks are propping up the overall market. When buying completes in these stocks, a down move may result. Two contrarian uses of the TICK/TIKI indicator are to look for divergence between price and the indicator, and to use high or low TICK/TIKI readings to identify momentum extremes - similar to how many traders use oscillators such as the relative strength index (RSI) or stochastics to locate overbought and oversold points.

A divergence occurs when price makes a new high (or low) but the TICK/TIKI makes a lower high (or higher low), failing to confirm the price move and warning of slackening momentum. A related phenomenon would be a steady trend in the TICK/TIKI that runs counter to the trend of the market. Extreme high or low TICK/TIKI readings can accompany market climaxes.

Because the TICK/TIKI is a snapshot of the market at a given moment (and is thus very volatile), it can be deceptive. As a result, the TICK/TIKI is commonly smoothed with a 10-period moving average to remove some of its "noise" and better reveal the indicator's direction and patterns.