Head and Shoulders
Technical Analysis
What it means
A reversal pattern with three peaks: a left shoulder, a higher head, and a lower right shoulder. A break below the "neckline" hints the up trend is over.
Example
A stock peaks at $50 (shoulder), then $55 (head), then $52 (shoulder), then breaks below the $48 neckline. The pattern projects a target near $41.
Mistake beginners make
Beginners call any three bumps a head and shoulders. The pattern needs a clear neckline and declining volume on the right shoulder; without those it is just three candles.
Related terms
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