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Head and Shoulders Pattern

The head and shoulders pattern is one of the most reliable reversal patterns in technical analysis. It signals a trend reversal from bullish to bearish and consists of three peaks: a higher middle peak (head) between two lower peaks (shoulders).

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Key Characteristics

1
Left shoulder: First peak followed by a decline
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Head: Higher peak, the highest point in the pattern
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Right shoulder: Third peak, similar height to left shoulder
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Neckline: Support line connecting the lows
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Volume: Typically decreasing from left to right
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Breakout: Price closes below neckline
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Measured move: Target equals head-to-neckline distance
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Retest: Often retests neckline as resistance

Trading Tips

  • ✓Wait for the neckline break before entering
  • ✓Volume should confirm the breakout (increase on break)
  • ✓Set stop-loss above the right shoulder
  • ✓Target is typically the height from head to neckline

Signal Strength & Reliability

The head and shoulders is considered one of the most reliable reversal patterns. Success rate is estimated at 70-85% when properly formed. The pattern is more reliable on higher timeframes and when accompanied by strong volume confirmation.

Head and Shoulders FAQs

Common questions about the head and shoulders pattern

A head and shoulders pattern indicates a potential reversal from an uptrend to a downtrend. It shows that buyers are losing momentum and sellers are gaining control, typically signaling a good time to exit long positions or enter short positions.

Confirm the pattern by waiting for a decisive close below the neckline. Volume should typically decrease during formation and increase on the breakdown. A retest of the broken neckline as resistance adds further confirmation.

An inverse (or reverse) head and shoulders is the opposite pattern, appearing at the bottom of downtrends. It signals a potential bullish reversal with three troughs: a lower middle trough (head) between two higher troughs (shoulders).

Related Patterns

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Double Top

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Rising Wedge

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All Chart Patterns

🎯 Head and Shoulders📉 Double Top📈 Double Bottom📐 Ascending Triangle📉 Descending Triangle🔺 Symmetrical Triangle🚩 Bull Flag🏴 Bear Flag⬆️ Rising Wedge⬇️ Falling Wedge☕ Cup and Handle📊 Support & Resistance

Disclaimer: Charted provides technical analysis for educational purposes only. This is not financial advice. All trading involves risk. Always consult a licensed financial professional before making investment decisions.

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