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Head and shoulders

A reversal pattern with three peaks, the middle one highest, and a neckline connecting the two troughs between them.

Head and shoulders topThree peaks, the middle one highest, sitting on a flat neckline that price later falls through.pricetimeLeft shoulderHeadRight shoulderNecklineprice closes back through it
Head and shoulders. Three peaks in a row, the middle one highest, with the two dips between them joined by a line called the neckline. Traders watch for price to close back through that line. Turned upside down the same shape is the inverse head and shoulders.

The pattern shows an trend losing strength: a high (left shoulder), a higher high (head), then a lower high (right shoulder). A close below the neckline completes it. An inverse head and shoulders is the bullish version at a low.

The conventional target is the height from head to neckline projected below the break. The pattern fails often enough that the neckline break, not the shape, should be the trigger.

Example: shoulders at $95 and $96, head at $105, neckline at $90. A close at $89 completes the pattern with a measured target of $90 - $15 = $75.

Related: trend, flag-pattern, resistance, breakout

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