Head and shoulders pattern

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    Head and shouldersThe head and shoulders candlestick pattern is a reversal pattern that occurs after an uptrend in the price.

    The head and shoulders pattern can be identified by two peaks of approximately the same level (representing the shoulders), with a third, higher peak in between them representing the head. Once this pattern occurs, the uptrend is generally considered to be over and the price is expected to fall.

    You will generally find support at the bottom of the head (which is called the neckline) and at the bottom of the shoulders. It is said that once the neckline is broken, the price will drop by the same amount as the distance from the head to the neckline.

    Head and shoulders pattern

    (1) Shoulder

    (2) Head

    Further reading

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