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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 stock trading chart pattern that forms after an extended Stock upward stock trading 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 stock 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 trading 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 stock 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 stock 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 stock trading example below:

Slanting Head and Shoulder Stock Trading Chart Pattern

 

 

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 stock trading 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 Stock downward stock trading trend. It resembles an upside-down head shoulders.

 

This stock trading pattern is considered complete once stock 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 trading 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 stock trading market
  • This formation resembles is upside-down, thus its name Reverse.
  • We buy when stock 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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