How to Read Head & Shoulders Pattern
Trade Head & Shoulders Chart Pattern
Head & Shoulders Chart Pattern is a reversal stock indices pattern which forms after an extended indices up-wards trend.
Head & Shoulders Chart Pattern is made up of 3 consecutive stock price peaks, the left shoulder, the head and the right shoulder with two moderate stock 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 stock price troughs in between the two shoulders.
To open a sell indices trade after this reversal signal -traders will place their sell stop pending orders just below the neck-line.
Summary: How to Interpret Head and Shoulders Pattern?
- Head & Shoulders Pattern forms after an extended upwards trend move
- Head & Shoulders Pattern signals that there'll be a reversal in the upwards trend
- Head & Shoulders Chart Pattern resembles a head with shoulders thus its name - head and shoulders stock indices pattern.
- To draw the neck-line we use chart point 1 and chart point 2 as shown on the head and shoulders stock chart pattern example explained and illustrated 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 stock chart pattern examples explained & illustrated below.
How to Read Head & Shoulders Pattern?
The head and shoulders stock chart pattern also can form on a sloping neckline - like on the head and shoulders stock chart pattern examples explained and illustrated below:
How to Read Head and Shoulders Pattern?
Head and Shoulders Chart Pattern on a Trading Chart
How to Trade Head & Shoulders Pattern?
Head & Shoulders Chart Pattern also can be formed on a sloping neckline - like on the head and shoulders stock chart pattern example above - the neckline does not necessarily have to be horizontal.
How to Trade Head & Shoulders Chart Pattern
Study More Courses and Lessons:
- Doji Candlesticks & Marubozu Candlesticks
- Best Index Platform Software for MAC
- Nasdaq 100 Strategies
- How Can I Find AS 51 in MT5 Stock Index Mobile Trade App?
- Moving Average Indicator Trend Identification
- How to Interpret DeMarks Projected Range Indices Technical Indicator
- How to Add IBEX35 on MT4 Android Trade App
- How Can I Open a Index Demo MetaTrader 4 Stock Indices Trading Account in MT4 Platform?
- EU50 Pip Size
- Ehlers Fisher Transform Stock Index Indicator Technical Analysis
