Reversal Chart Patterns: Head and Shoulders & Reverse Head Shoulders
Head and shoulders Gold Chart Pattern
This is a reversal chart pattern that forms after an extended XAUUSD Trading 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 xauusd pattern is considered complete once gold price penetrates and moves below the neckline, which is drawn by joining the two troughs between the shoulders pattern.
To go short, XAUUSD traders place their sell stop orders just below the neckline.
Summary:
- This XAUUSD Trading pattern forms after an extended move upwards
- This formation indicates that there will be a reversal in the gold trading market
- This formation resembles head with shoulders thus its name.
- To draw the neckline we use chart point 1 and point 2 as shown below. We also extend this line in both directions.
- We sell when price breaks below the neckline point: see the trading chart below for explanation.
Or the head and shoulders can also form on a slanting neckline, like the xauusd example shown below:
Example of Head and Shoulders Pattern on a XAUUSD Chart
Head and Shoulders Pattern
This xauusd chart 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 Chart Pattern
This is a reversal head and shoulders pattern that forms after an extended XAUUSD Trading downward trend. It resembles an upside-down head shoulders.
This xauusd pattern is considered complete once gold price penetrates above the neckline, which is drawn by joining these two peaks between the reverse shoulders pattern.
To go long buyers place their buy stop gold trade orders just above the neckline.
Summary:
- This XAUUSD Trading pattern forms after an extended move downwards
- This formation indicates that there will be a reversal in the gold trading market
- This formation resembles is upside-down, thus the name Reverse.
- We buy when price breaks above the neckline point: see the trading chart below for explanation.
Example of Reverse Head and Shoulders Pattern on a XAUUSD Chart
Example of Reverse Head and Shoulders Pattern
