Reversal Chart Patterns: Head & Shoulders and Reverse Head Shoulders

Head and shoulders Pattern

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

This pattern setup is considered complete once stock price penetrates below neckline, which is drawn by joining these two troughs between the shoulders.

To go short, traders set their sell stop orders just below the neck-line.

Summary:

This setup forms after an extended move upward
This formation indicates that there'll be a reversal in the stock trading market
This formation resembles head with shoulders thus its name.
To draw the neck line we use point 1 & point 2 as displayed below. We also extend this line in both directions.
We sell when stock price breaks out below the neck line point: see the chart below for explanation.

Reversal Chart Setups: Head and Shoulders Chart Patterns & Reverse Head & Shoulders Chart Patterns

Or the head & shoulders also can form on a sloping neck line, like the stock example explained below:

Slanting Head and Shoulder Pattern

Example of Head & Shoulders Pattern on a Trading Chart

Example of Head and Shoulders Setup on a Chart

Head and Shoulders Pattern

This stock chart pattern also can be formed on a sloping neckline, like the one above, the neck line doesn't have to be necessarily horizontal.

Reverse Head & Shoulders Pattern

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

This pattern setup is considered complete once stock price penetrates above neck-line, which's drawn by joining these two peaks between the reverse shoulders pattern.

To go long buyers/bulls set their buy stop pending orders just above neckline.

Summary:

This pattern setup forms after an extended move downwards
This pattern indicates that there'll be a reversal in the stocks trading market
This formation resembles upside down, thenceforth the name Reverse.
We buy when stock price breaks above the neck line point: see the chart below for explanation.

How to Interpret Reverse Head and Shoulders Chart Pattern

Example of Reverse Head and Shoulders Pattern on a Trading Chart

Reverse Head & Shoulders Chart Setup in Indices Trading

Example of Reverse Head & Shoulders Pattern

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Reversal Chart Patterns: Head & Shoulders and Reverse Head Shoulders

Head and shoulders Pattern

Reverse Head & Shoulders Pattern