Head And Shoulders Pattern

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DEFINITION of 'Head And Shoulders Pattern'

A technical analysis term used to describe a chart formation in which a stock's price:

1. Rises to a peak and subsequently declines.
2. Then, the price rises above the former peak and again declines.
3. And finally, rises again, but not to the second peak, and declines once more.

The first and third peaks are shoulders, and the second peak forms the head.

Head And Shoulders Pattern

INVESTOPEDIA EXPLAINS 'Head And Shoulders Pattern'

The "head-and-shoulders" pattern is believed to be one of the most reliable trend-reversal patterns.

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