About Lesson
Head and Shoulders Pattern
A head and shoulders pattern is also a trend reversal formation.
It is formed by a peak (shoulder), followed by a higher peak (head), and then another lower peak (shoulder). A “neckline” is drawn by connecting the lowest points of the two troughs. The slope of this line can either be up or down. The head is the second peak and is the highest point in the pattern. The two shoulders also form peaks but do not exceed the height of the head. With this formation, we put an entry order below the neckline.