Reversal Oil Trading Chart Patterns: Head and Shoulders & Reverse Head Shoulders

Head and shoulders Oil Trading Chart Pattern

This is a reversal crude oil pattern which forms after an extended Oil Trading upwards oil trend. It is made up of three consecutive peaks, the left shoulder, the head & right shoulder with 2 moderate troughs between the shoulders.

This oil trading pattern is considered complete once oil trading price penetrates and moves below neck line, which is plotted by connecting these 2 troughs in between the shoulders.

To go short, Oil traders place their sell stop oil orders just below the neck line.

Summary:

• This Oil Trading pattern forms after an extended move upwards
• This formation indicates that there will be a reversal in crude oil market
• This formation resembles head with shoulders thus its name.
• To draw the neck-line we use chart point 1 and point 2 as displayed below. We also extend this line in both directions.
• We sell when crude oil price breaks out below the neck-line: see the chart below for explanation.

Or the head & shoulders can also form on a slanting neckline, like the crude oil trading example explained below:

Examples of Head & Shoulders Pattern on a Oil Trading Chart

Head & Shoulders Pattern

This crude oil pattern can also be formed on a slanting neckline, like the one above, the neck line doesn't have to be necessarily horizontal.

Reverse Head & Shoulders Oil Trading Pattern

This is a reversal head and shoulders pattern which forms after an extended Oil Trading downwards oil trend. It resembles an upside-down head shoulders.

This oil trading pattern is considered complete once oil price penetrates above neck line, which is plotted by connecting these two peaks between the reverse shoulders pattern.

To go long buyers place their buy stop oil orders just above the neck line.

Summary:

• This Oil Trading pattern forms after an extended move downwards
• This formation indicates that there will be a reversal in crude oil market
• This formation resembles upside down, thus the name Reverse.
• We buy when crude oil trading price breaks-out above neck-line: see the chart below for explanation.

Examples of Reverse Head & Shoulders Pattern on a Oil Trading Chart

Examples of Reverse Head and Shoulders Pattern