Head and shoulders pattern
Family VI · Charts & indicators
Not to be confused with support and resistance, candlestick pattern, chart pattern.
Head and shoulders pattern is a reversal chart pattern that appears after an uptrend and consists of three peaks: a left shoulder, a higher head, and a right shoulder of similar height to the left. A neckline is drawn through the lows between the peaks, and a decisive close below it is taken as confirmation of a trend change. The pattern is widely watched but not infallible; false breaks occur.
Structure and confirmation
The pattern requires an existing uptrend, three distinct peaks, and a neckline connecting the two intervening troughs. Volume often diminishes on the right shoulder and expands on the breakdown. Confirmation is a close below the neckline, though some traders wait for a retest. The measured move target is the distance from the head to the neckline, projected downward from the breakdown point.
Worked example
Limitations
Patterns are subjective; different analysts may draw the neckline differently. False breakdowns are common, especially in low-volume markets. The pattern works best when combined with other evidence such as volume, momentum divergence, or a retest of the neckline. No pattern guarantees a reversal.
Often confused with
- support and resistance
- Support and resistance are horizontal price levels where buying or selling pressure has previously emerged, whereas a head and shoulders pattern is a specific multi-peak formation that includes such levels; the visible sign is that support and resistance is a line or zone, while head and shoulders is a shape with three peaks.
- candlestick pattern
- A candlestick pattern is a short-term formation built from one or a few candles, while a head and shoulders pattern spans many candles and forms over weeks or months; the visible sign is that a candlestick pattern appears within a few bars, whereas head and shoulders requires a series of peaks and troughs.
- chart pattern
- A chart pattern is any recurring shape in price data, such as triangles or flags, whereas head and shoulders is one specific type of chart pattern; the visible sign is that chart pattern is the general category, while head and shoulders is a named instance with three peaks.
See also
- forex technical analysis indicators
- price action
- fundamental analysis
- support and resistance
- technical analysis
- fibonacci