Reversal Setups: Head and Shoulders and Reverse Head Shoulders

Head & shoulders Pattern

This is a reversal stock chart pattern that forms after an extended upwards trend. It is made up of 3 consecutive peaks, the left shoulder, head & the right shoulder with 2 moderate troughs in between the shoulders.

This pattern setup is considered complete once stock price penetrates below neckline, which is drawn by joining these 2 troughs in between the shoulders pattern.

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 setup resembles head with shoulders thus its name.
To draw the neck-line we use point 1 & point 2 such as shown below. We also extend the line in both directions.
We sell when stock price breaks out below the neck-line point: see the chart below for an explanation.

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

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

Slanting Head and Shoulders Chart Setup

Example of Head and Shoulder Chart Setup on a Trade Chart

Example of Head Shoulders Chart Setup on a Chart

Head & Shoulders Chart Setup

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

Reverse Head and Shoulders Chart Setup

This is a reversal head & shoulders pattern that forms after an extended downwards trend. It looks like an upside down head shoulders.

This pattern setup is considered complete once stock price penetrates above neck-line, which's drawn by connecting these 2 peaks in between the reverse shoulders pattern.

To go long buyers/bulls set their buy stop pending orders just above neck-line.

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 setup formation resembles up-side down, thenceforth the name Reverse.
We buy when stock price breaks above the neck-line point: see the chart below for an explanation.

How to Analyze Reverse/Inverse Head and Shoulders Chart Setup

Example of Reverse Head & Shoulders Chart Setup on a Trade Chart

Reverse/Inverse Head and Shoulders Chart Setup in Stock Index Trade

Example of Reverse Head Shoulders Chart Setup

Get More Tutorials & Courses:

Trade Stock Indices

Reversal Setups: Head and Shoulders and Reverse Head Shoulders

Head & shoulders Pattern

Reverse Head and Shoulders Chart Setup