How Do I Analyze Head & Shoulders Chart Pattern?

How Do You Trade Head & Shoulders Chart Pattern?

Head & Shoulders Pattern is a reversal setup which forms after an extended upward trend.

Head and Shoulders Chart Pattern is made up of 3 consecutive price peaks, the left shoulder, the head & the right shoulder with 2 moderate price troughs between the two shoulders.

This Head and Shoulders Chart Pattern is considered to be complete once the price penetrates and moves below the neckline - the neckline is drawn by joining the two price troughs in between the two shoulders.

To open a sell trade after this reversal - traders will place their sell stop pending orders just below the neckline.

Summary: How Do You Interpret Head and Shoulders Pattern?

• Head and Shoulders Chart Pattern forms after an extended upward trend move
• Head and Shoulders Pattern signals that there will be a reversal in the upwards trend
• Head & Shoulders Chart Pattern resembles a head with shoulders thus its name - head and shoulders pattern.
• To draw the neck-line we use chart point 1 & chart point 2 as shown on the head and shoulders chart pattern example below. We also extend this neck line in both directions.
• traders will sell when the price breaks-out below the neck-line: as described on the head and shoulders chart pattern example below.

How Do I Analyze Head & Shoulders Pattern?

The head and shoulders chart pattern can also form on a slanting neckline - like on the head and shoulders chart pattern example below:

How Do I Analyze Head & Shoulders Pattern?

Head & Shoulders Pattern on a Chart

How Do I Analyze Head & Shoulders Chart Pattern?

Head & Shoulders Pattern can also be formed on a slanting neck line - like on the head and shoulders pattern examples above - the neck-line doesn't necessarily have to be horizontal.

How Do I Analyze Head & Shoulders Pattern?