Head And Shoulders Pattern

Loading the player...

What is a 'Head And Shoulders Pattern'

A head and shoulders pattern is 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

BREAKING DOWN 'Head And Shoulders Pattern'

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

RELATED TERMS
  1. Triple Top

    A pattern used in technical analysis to predict the reversal ...
  2. Descending Tops

    A pattern in charts where each peak in price is lower then the ...
  3. Inverse Head And Shoulders

    A chart pattern used in technical analysis to predict the reversal ...
  4. Neckline

    A level of support or resistance found on a head and shoulders ...
  5. Uptrend

    Describes the price movement of a financial asset when the overall ...
  6. Peak

    The highest point between the end of an economic expansion and ...
Related Articles
  1. Forex

    Chart Basics (Head and Shoulders)

    Here is a popular charting pattern known as head and shoulder.
  2. Charts & Patterns

    How To Trade The Head-And-Shoulders Pattern

    The head-and-shoulders chart pattern is easy to spot, and its entry levels, stop levels and price targets make it simple for traders to use.
  3. Trading Strategies

    How To Trade The Head And Shoulders Pattern

    The head-and-shoulders chart pattern is a popular and easy-to-spot pattern - once a trader is aware of what they are watching for.
  4. Charts & Patterns

    Analyzing Chart Patterns: Head And Shoulders

    By Chad Langager and Casey Murphy, senior analyst of ChartAdvisor.com The head-and-shoulders pattern is one of the most popular and reliable chart patterns in technical analysis. And as one ...
  5. Charts & Patterns

    Analyzing Chart Patterns: Round Bottoms

    By Chad Langager and Casey Murphy, senior analyst of ChartAdvisor.com A rounding bottom, also referred to as a saucer bottom, is a long-term reversal pattern that signals a shift from a downtrend ...
  6. Active Trading Fundamentals

    4 Stocks With Bullish Head and Shoulders Patterns for 2016 (PG, ETR)

    Discover analyses of the top four stocks with bullish head and shoulders patterns forming in 2016, and learn the prices at which they should be considered.
  7. Trading Strategies

    Mastering Short-Term Trading

    The proper application of a few different tools can help a short-term trader succeed.
  8. Trading Strategies

    Technical Analysis: Chart Patterns

    By Cory Janssen, Chad Langager and Casey MurphyA chart pattern is a distinct formation on a stock chart that creates a trading signal, or a sign of future price movements. Chartists use these ...
  9. Trading Strategies

    What Is The Head And Shoulders Pattern?

    The head and shoulders chart pattern is a popular and easy-to-spot pattern - once a trader is aware of what they are watching for.
  10. Chart Advisor

    These Technology Stocks are Rolling Over

    These technology looked to have topped out, and could be heading lower.
RELATED FAQS
  1. How do I implement a forex strategy when spotting a Multiple Tops pattern?

    Understand how to use a multiple tops chart pattern to establish a profitable forex trading strategy, including the optimal ... Read Answer >>
  2. How effective is creating trade entries after spotting a Multiple Tops pattern?

    Understand the basics of trading based on a multiple tops chart pattern, and learn what elements should be of primary focus ... Read Answer >>
  3. How do I implement a forex strategy when spotting a Triple Top Pattern?

    Learn about the triple top chart pattern and how to use this reliable reversal signal to create an effective trade strategy ... Read Answer >>
  4. How are Triple Top patterns interpreted by analysts and traders?

    Learn about the formation of the triple top chart pattern and how this reliable reversal signal is interpreted by analysts ... Read Answer >>
  5. How do I build a profitable trading strategy when spotting an Multiple Tops pattern?

    Understand the optimal conditions for creating a profitable trade strategy based on the multiple tops pattern, and learn ... Read Answer >>
  6. A head and shoulders top formation chart: I. is a bearish chart II ...

    The correct answer is d. A head and shoulders chart, top formation, is a chart of a stock’s movement that resembles the outline ... Read Answer >>
Hot Definitions
  1. Law Of Demand

    A microeconomic law that states that, all other factors being equal, as the price of a good or service increases, consumer ...
  2. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  3. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  4. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  5. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  6. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
Trading Center