Reversal Setups Head and Shoulders & Reverse/Inverse Head and Shoulders

Head and Shoulders Reversal Setup

This is a reversal pattern setup formation that forms after an extended XAUUSD price upward trend. It's made up of 3 consecutive peaks, the left shoulder, the head & the right shoulder with two moderate troughs between the shoulders pattern.

This Head & Shoulders Reversal Setup is considered complete once the price penetrates below the neck line, which's plotted by connecting the two troughs between the shoulders pattern.

To go short, XAU USD traders place their sell stop orders just below the neckline.

Summary:This reversal setup forms after an extended move upward

This setup reflects that there'll be a reversal in the market

This setup resembles and looks like head with shoulders thus its title.

To plot the neckline we use chart point 1 & point 2 just as is shown below. We also extend this line in both directions.

We sell when price breaks-out below the neckline: see the chart below for explanation.

Or the head and shoulders can also form on a sloping neckline, like the illustration below:

Explanation of Head Shoulders Setup on a XAU/USD Price Chart

Head & Shoulders Setup

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

Reverse Head and Shoulders Reversal Pattern

This is a reversal head and shoulders setup that forms after an extended XAUUSD downwards trend. It resembles an upside-down head & shoulders pattern.

This Head and Shoulders Reversal Pattern is regarded complete once the price penetrates above the neckline, which is plotted by joining the two peaks between the reverse head and shoulders pattern.

To go long buyers/bulls place their buy stop orders just above the neckline.

Summary:This reversal setup forms after an extended move downward

This pattern reflects that there'll be a reversal in the market

This setup resembles an upside-down head and shoulders pattern, thus its name Reverse.

We buy when price breaks above the neckline: see the chart below for explanation.

Explanation of Reverse/Inverse Head and Shoulders Setup on a XAU/USD Price Chart

Reverse Head and Shoulders Setup

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