Head And Shoulders Pattern

Head and Shoulders Pattern is a technical analysis term used to describe a chart formation that appears to outline a human head and shoulders.  The Head and Shoulders pattern is considered to be very bearish.

Head and Shoulders Pattern

Head and Shoulders Pattern is a technical analysis term used to describe a chart formation that appears to outline a human head and shoulders.  The Head and Shoulders pattern is considered to be very bearish.

 

Head and Shoulders Pattern Identification

The Head and Shoulders Pattern chart formation occurs when a stock's price:

  1. Rises to a peak and subsequently declines.
  2. The price rises above the former peak and again declines.
  3. And finally, rises again, but not to the second peak, and declines once more.

The first and third peaks are shoulders, and the second peak forms the head.





Head and Shoulders Pattern Interpretation

The Head and Shoulders Pattern is extremely bearish.  Traders typically wait until the neckline has been breached on high volume before entering a short position.

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