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Head and Shoulders

The Head and Shoulders pattern is one of the most reliable reversal patterns in technical analysis. It appears at the top of an uptrend and signals a reversal to a downtrend.

ShoulderHeadShoulderNecklineHead & Shoulders: 3 peaks, middle highest → Break neckline → Decline

Pattern Details

Category

reversal

Success Rate

89%

Average Move

-18%

Duration

3-4 weeks

Pattern Structure

Pattern Structure
Key components that define this chart pattern
  • 1
    Left Shoulder: First peak, lower than the head
  • 2
    Head: Highest peak, positioned in the center
  • 3
    Right Shoulder: Third peak, similar height to left shoulder
  • 4
    Neckline: Connects the two troughs between peaks

Trading Rules

Trading Rules
Essential rules for trading this pattern successfully
  • ✓
    Wait for price to break below neckline before entering trade
  • ✓
    Volume should increase on breakout
  • ✓
    Price target = Distance from head to neckline
  • ✓
    Stop loss placed above right shoulder
Trading Tips
  • Shoulders don't need to be perfectly symmetrical
  • Neckline can slope slightly
  • Use additional indicators for confirmation

Statistics

Breakout Statistics
Bullish Breakout0%
Bearish Breakout89%
Performance Metrics
Average Rise+0%
Average Decline-18%
Pullback Rate4%