Head and Shoulders
The Head and Shoulders pattern is one of the most reliable bearish reversal patterns in technical analysis. It signals the end of an uptrend and the beginning of a potential downtrend, making it a favorite among traders for timing market exits and short entries.
Best Timeframe
1D - 1W
Average Move
8-15%
- 1
Left Shoulder: Price rises to a peak and then declines, forming the first shoulder on moderate volume.
- 2
Head: Price rises again to a higher peak (the head) and then declines. This peak should be higher than the left shoulder.
- 3
Right Shoulder: Price rises once more but fails to reach the height of the head, forming a lower peak similar to the left shoulder.
- 4
Neckline: A support line is drawn connecting the two troughs between the shoulders and head.
- 5
Breakdown: Price breaks below the neckline, confirming the pattern and signaling the reversal.
Entry Point
Enter short position when price breaks below the neckline with increased volume
Stop Loss
Place stop loss above the right shoulder peak to limit risk
Target
Measure distance from head to neckline, project same distance below neckline break
- Volume should decrease as the pattern forms and increase on the neckline break
- The right shoulder should be lower than the head but similar height to left shoulder
- A pullback to the neckline after breakdown is common and offers another entry opportunity
- The pattern is more reliable on longer timeframes (daily, weekly charts)
- Symmetry between shoulders increases pattern reliability
- Entering too early before neckline confirmation
- Ignoring volume confirmation - low volume breaks are less reliable
- Setting stop loss too tight, not accounting for false breakouts
- Expecting perfect symmetry - slight variations are normal
- Trading the pattern in strong trending markets without context
Test your knowledge with interactive exercises and real market examples.