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Reversal Stock Trading Chart Patterns: Head and Shoulders & Reverse Head Shoulders

Head and shoulders Stock Trading Chart Pattern

This is a reversal stocks chart pattern that forms after an extended Stock upward stocks trend. It is made up of three consecutive peaks, the left shoulder, the head and the right shoulder with two moderate troughs between the shoulders.


This stock trading pattern is considered complete once stocks price penetrates below the neckline, which is drawn by joining the two troughs between the shoulders.


To go short, Stock traders place their sell stop stock orders just below the neckline.


Summary:


  • This Stock pattern forms after an extended move upwards

  • This formation indicates that there will be a reversal in the stocks trading market

  • This formation resembles head with shoulders thus its name.

  • To draw the neckline we use chart point 1 and point 2 as shown below. We also extend this line in both directions.

  • We sell when stocks price breaks below the neckline; see the chart below for explanation.

Reversal Stock Trading Chart Patterns


Or the head and shoulders can also form on a slanting neckline, like the stocks trading example explained below:

Slanting Head and Shoulder Stock Trading Chart Pattern


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Example of Head and Shoulders Pattern on a Stock Trading Chart

Example of Head and Shoulders Pattern on a Stock Trading Chart

Head and Shoulders Pattern


This stocks chart pattern can also be formed on a slanting neckline, like the one above, the neckline does not have to be necessarily horizontal.



Reverse Head and shoulders Stock Trading Chart Pattern

This is a reversal head and shoulders pattern that forms after an extended Stocks downward stock trend. It resembles an upside-down head shoulders.


This stock trading pattern is considered complete once stocks price penetrates above the neckline, which is drawn by joining the two peaks between the reverse shoulders.


To go long buyers place their buy stop stock orders just above the neckline.


Summary:


  • This Stock pattern forms after an extended move downwards

  • This formation indicates that there will be a reversal in the stocks trading market

  • This formation resembles is upside-down, thus its name Reverse.

  • We buy when stocks price breaks above the neckline; see the chart below for explanation.

Reverse Head and shoulders Stock Trading Chart Pattern


Example of Reverse Head and Shoulders Pattern on a Stock Trading Chart



Reverse Head and shoulders Stock Trading Chart Pattern in Stock Trading

Example of Reverse Head and Shoulders Pattern

 

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