📗 Educational Post :

Head and Shoulders

Referring to the chart above, we can see a head and shoulders pattern. Prior to this pattern there was an uptrend. Prices are rallying higher with greater momentum to create the highest peak which is called the head. The lower peaks on either side of the head are called shoulders. A neckline is drawn by connecting the lowest points of the two troughs on either side of the head.

As prices breakout and fall below the neckline at the right shoulder, this signifies a reversal in the prior trend. A downtrend now takes place.

In this chart formation, a sell position can be entered at the breakout point below the neckline.

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