Head and Shoulders Pattern
A reversal pattern consisting of three peaks, with the middle peak (head) higher than the two shoulders, signaling a trend reversal from bullish to bearish.
Quick Answer
A reversal pattern consisting of three peaks, with the middle peak (head) higher than the two shoulders, signaling a trend reversal from bullish to bearish.
What Is the Head and Shoulders Pattern?
The Head and Shoulders pattern is one of the most reliable reversal patterns in technical analysis. It forms after an uptrend and consists of a left shoulder, a higher head, and a right shoulder that's roughly equal to the left shoulder. The neckline connects the lows between the shoulders. A break below the neckline confirms the pattern and signals a bearish reversal.
How the Head and Shoulders Forms
- 1Price makes a new high (left shoulder) then pulls back
- 2Price rallies to a higher high (head) then pulls back to neckline
- 3Price rallies but fails to exceed the head (right shoulder)
- 4Price breaks below the neckline to confirm the pattern
How to Confirm the Pattern
Price Target Calculation
Measure the distance from the head to the neckline, then project that distance downward from the neckline break point.
Best Timeframes for Head and Shoulders
How to Trade the Head and Shoulders
- →Identify major trend reversals
- →Set price targets for short positions
- →Determine stop-loss levels above right shoulder
- →Time entries on neckline break or retest
Common Mistakes to Avoid
Detect Head and Shoulders Automatically
VaultCharts automatically detects Head and Shoulders patterns on your charts. No manual analysis needed - the pattern is highlighted with entry zones and targets.