How to Read Head and Shoulders Chart Pattern

Indices Trade Head & Shoulders Chart Pattern

Head and Shoulders Chart Pattern is a reversal stock indices pattern which forms after an extended indices upwards trend.

Head & Shoulders Chart Indices Pattern is made up of 3 consecutive stock indices price peaks, the left shoulder, the head and the right shoulder with two moderate stock indices price troughs between the two shoulders.

This Head & Shoulders Chart Pattern is considered to be complete once the stock indices price penetrates and moves below the neckline - the neckline is drawn by joining the two stock indices price troughs in between the two shoulders.

To open a sell indices trade after this indices reversal trading signal -indices traders will place their sell stop pending orders just below the neck line.

Summary: How to Interpret Head and Shoulders Chart Pattern?

• Head & Shoulders Chart Pattern forms after an extended indices upward trend move
• Head & Shoulders Pattern signals that there will be a reversal in the upwards trend
• Head & Shoulders Chart Pattern resembles a head with shoulders thus its name - head and shoulders stock indices trading pattern.
• To draw the neckline we use chart point 1 and chart point 2 as shown on the head and shoulders stock indices chart pattern example explained and illustrated below. We also extend this neckline in both directions.
• Indices traders will sell when the stock indices price breaks-out below the neck-line: as described on the head and shoulders stock indices chart pattern examples explained & illustrated below.

How to Read Head and Shoulders Pattern?

The head and shoulders stock indices chart pattern can also form on a slanting neckline - like on the head and shoulders stock indices chart pattern examples explained and illustrated below:

How to Read Head and Shoulders Pattern?

Head & Shoulders Chart Pattern on a Indices Chart

How to Trade Head and Shoulders Pattern?

Head & Shoulders Chart Pattern can also be formed on a slanting neckline - like on the head and shoulders stock indices chart pattern example above - the neckline does not necessarily have to be horizontal.

How to Trade Head & Shoulders Chart Pattern