Glossary · Candlestick & Chart Patterns
Head and shoulders
A three-peak pattern often watched for trend reversals.
A classic head and shoulders has three peaks: a left shoulder, a higher middle peak (the head), and a right shoulder similar in height to the left. A neckline connects the lows between those peaks. A break below the neckline is the traditional completion signal for a bearish reversal.
The inverse head and shoulders is the mirror image after a downtrend and is watched as a potential bullish reversal. Measuring the pattern height from head to neckline is a common way traders set rough profit targets — still just a guideline.
Example
Price peaks at $40, $48, then $41, with a neckline near $36. A close under $36 completes a head-and-shoulders breakdown many chartists watch.