Technical Analysis of Head and Shoulders Chart Patterns

Commodity Trading Interpret Head & Shoulders Chart Patterns

Head and Shoulders Chart Pattern

Head and Shoulders Pattern is a reversal chart pattern which forms after an extended Commodity Trading upwards trend.

Head & Shoulders Chart Pattern is made up of 3 consecutive peaks, left shoulder, the head & right shoulder with two moderate troughs between the two shoulders.

This Head and Shoulders Pattern is considered complete once commodities price penetrates below the neckline, which is drawn by joining these two troughs between the shoulders.

To open a sell commodity trade after this reversal commodity trading signal, Commodity traders place their sell stop pending orders just below neckline.

Summary:

• This Head & Shoulders Pattern forms after an extended move upwards - commodity upwards trend
• This Head & Shoulders Chart Pattern formation indicates that there will be a reversal in commodities trading market
• This Head & Shoulders Chart Pattern formation looks like a head with shoulders thus its name.
• To draw the neck-line we use chart point 1 & point 2 as shown on the commodities trading example shown below. We also extend this line in both directions.
• We sell when price breaks-out below neck-line: as explained on the commodities trading example shown below.

Analysis of Head and Shoulders Chart Patterns?

Or the head and shoulders chart pattern can also form on a slanting neck line, like the commodities trading example shown below:

Analysis of Head and Shoulders Chart Patterns?

Example of Head & Shoulders Trading Pattern on a Commodity Trading Chart

How to Trade the Head and Shoulders Chart Pattern

This Head & Shoulders Pattern can also be formed on a slanting neck line, like the head & shoulders chart pattern example above, neckline does not have to be necessarily horizontal.