Reversal Chart Patterns: Head and Shoulders & Reverse Head Shoulders
Head and shoulders Stock Chart Pattern
This is a reversal trading pattern that forms after an extended Stocks Trading upwards stock trend. It is made up of three consecutive peaks, the left shoulder, the head & the right shoulder with 2 moderate troughs between the shoulders.
This stocks pattern is considered complete once stocks trading price penetrates and moves below neck line, which is plotted by connecting these two troughs in between the shoulders.
To go short, Stocks traders place their sell stop pending orders just below the neckline.
Summary:
- This Stocks Trading pattern forms after an extended move upwards
- This formation indicates that there will be a reversal in the stocks market
- This formation resembles head with shoulders thus its name.
- To draw the neckline we use chart point 1 & point 2 as displayed below. We also extend this line in both directions.
- We sell when the price breaks below the neck line: see the chart below for explanation.
Or the head & shoulders can also form on a slanting neck line, like the stocks example illustrated and explained below:
Examples of Head & Shoulders Pattern on a Stocks Chart
Head & Shoulders Pattern
This stocks pattern can also be formed on a slanting neck line, like the one above, the neck line doesn't have to be necessarily horizontal.
Reverse Head & Shoulders Trading Pattern
This is a reversal head and shoulders pattern that forms after an extended Stocks Trading downwards trend. It resembles an upside-down head shoulders.
This stocks pattern is considered complete once stocks price penetrates above the neck line, which is plotted by connecting these two peaks between the reverse shoulders pattern.
To go long buyers place their buy stop pending orders just above the neck-line.
Summary:
- This Stocks Trading pattern forms after an extended move downwards
- This formation indicates that there will be a reversal in the stocks market
- This formation resembles upside down, thus the name Reverse.
- We buy when price breaks above the neck line: see the chart below for explanation.
Examples of Reverse Head & Shoulders Pattern on a Stocks Chart
Examples of Reverse Head & Shoulders Pattern
