Reversal Chart Patterns Head and Shoulders & Reverse Head and Shoulders

Head and Shoulders Reversal Chart Pattern

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

This Head & Shoulders Reversal Chart Pattern is considered complete once price penetrates below the neck-line, which is plotted by joining the two troughs between the shoulders.

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

Summary:This reversal pattern forms after an extended move upwards

This formation indicates that there will be a reversal in the market

This formation resembles head with shoulders thus its name.

To plot the neckline we use chart point 1 & point 2 as 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 slanting neckline, like the example below:

Example of Head & Shoulders Pattern on a XAUUSD Price Chart

Head and Shoulders Chart Pattern

This reversal pattern can also be formed on a slanting neckline, like the one above, the neck-line does not have to be necessarily horizontal.

Reverse Head and Shoulders Reversal Pattern

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

This Head and Shoulders Reversal Pattern is considered complete once 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 pattern forms after an extended move downwards

This formation indicates that there will be a reversal in the market

This formation 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.

Example of Reverse Head & Shoulders Chart Pattern on a XAUUSD Price Chart

Reverse Head and Shoulders Chart Pattern