Neckline

Dictionary Says

Definition of 'Neckline'


A level of support or resistance found on a head and shoulders pattern that is used by traders to determine strategic areas to place orders. Each peak of a regular head and shoulders pattern falls toward a support level, also known as a neckline, before it rises to create the next peak. A move below the neckline (in the case of a head and shoulders top) is used by traders as a signal of a reversal of the current uptrend.



Neckline
Investopedia Says

Investopedia explains 'Neckline'


It is possible to see the slope of a neckline be drawn at a slight angle rather than horizontal like the one shown in the image above. However, regardless of its slope, a move below the neckline of a regular head and shoulders pattern is always used as a signal of a move lower.

In the case of an inverse head and shoulders, the neckline is found as a level of resistance that has prevented the price from heading higher. A move beyond the neckline in this case would be used to signal the start of an uptrend.

comments powered by Disqus
Hot Definitions
  1. Valuation

    The process of determining the current worth of an asset or company. There are many techniques that can be used to determine value, some are subjective and others are objective.
  2. Valuation

    The process of determining the current worth of an asset or company. There are many techniques that can be used to determine value, some are subjective and others are objective.
  3. Tech Street

    A term used in the financial markets and the press to refer to the technology sector. Companies like Intel, Microsoft, Apple and Dell are all considered to be part of Tech Street.
  4. Tech Street

    A term used in the financial markets and the press to refer to the technology sector. Companies like Intel, Microsoft, Apple and Dell are all considered to be part of Tech Street.
  5. Momentum Investing

    An investment strategy that aims to capitalize on the continuance of existing trends in the market. The momentum investor believes that large increases in the price of a security will be followed by additional gains and vice versa for declining values.
  6. Momentum Investing

    An investment strategy that aims to capitalize on the continuance of existing trends in the market. The momentum investor believes that large increases in the price of a security will be followed by additional gains and vice versa for declining values.
Trading Center