Head and Shoulders Pattern
Original schematic showing the guide's principal visual relationships.
Left shoulder → higher head → right shoulder; confirmation requires a close below the neckline.
Pattern anatomy
A three-peak reversal structure in which the middle peak is highest and the neckline defines confirmation.
Left shoulder → higher head → right shoulder; confirmation requires a close below the neckline.
How it works
Identify the prior trend first, mark repeated swing highs and lows, then draw only the support, resistance, or neckline justified by those pivots. A pattern remains provisional until price closes beyond its confirmation boundary; visual resemblance alone is not enough.
How to read it
The right shoulder shows that buyers failed to regain the head's high. Traders commonly measure the head-to-neckline distance and project it below the break, while treating a move back above the right shoulder as invalidation.
Practical example
After a sustained advance, price forms a peak, a higher peak, and a lower third peak. A daily close below the neckline completes the pattern; the head-to-neckline distance provides a reference objective, while a recovery above the right shoulder challenges the bearish case.
Confirmation checklist
Look for an established prior trend, a completed boundary break, and preferably expanding volume or momentum confirmation. A reversal pattern formed without a trend to reverse is weaker evidence.
Limitations and false signals
Sloping necklines and uneven shoulders are common, so overly precise symmetry creates false identifications. Breaks without participation can quickly reverse.
Limitations and false signals
Frequently asked questions
What does this pattern or indicator describe?
A three-peak reversal structure in which the middle peak is highest and the neckline defines confirmation.
How should the signal be confirmed?
The right shoulder shows that buyers failed to regain the head's high. Traders commonly measure the head-to-neckline distance and project it below the break, while treating a move back above the right shoulder as invalidation. Look for an established prior trend, a completed boundary break, and preferably expanding volume or momentum confirmation. A reversal pattern formed without a trend to reverse is weaker evidence.
What can cause a false signal?
Sloping necklines and uneven shoulders are common, so overly precise symmetry creates false identifications. Breaks without participation can quickly reverse.