Courses / Chart Patterns Masterclass

Head and Shoulders

The best-known reversal pattern: three peaks with the middle one highest.

A head and shoulders top has a left shoulder, a higher head and a right shoulder, with a neckline connecting the lows between them. It appears after an uptrend and signals a possible reversal.

The pattern is confirmed when price closes below the neckline. A common target is the distance from the head to the neckline, projected down from the breakout.

Retests of the neckline are common. A stop above the right shoulder limits risk. Volume often declines on the right shoulder.

Key takeaways

• Three peaks, middle highest, with a neckline
• Confirmation is a close below the neckline
• Measured target = head to neckline distance

Quiz

• The neckline connects: Answer: The lows between the peaks. It joins the troughs between the shoulders and head.
• A head and shoulders top usually forms after: Answer: An uptrend. It is a reversal of an uptrend.
• The usual stop for a short is above: Answer: The right shoulder. A break above the right shoulder invalidates it.

Educational content, not financial advice.