A head and shoulders pattern is a reversal chart pattern formed by three peaks — a higher middle peak (the head) flanked by two lower, roughly equal peaks (the shoulders) — connected along the bottom by a "neckline". A confirmed break below the neckline is read as a signal the preceding uptrend is reversing into a downtrend; the inverse (head and shoulders bottom) signals the opposite.
The pattern's projected target is typically measured as the distance from the head to the neckline, extended downward from the neckline break.
Head and Shoulders Pattern
A three-peak reversal pattern (two shoulders around a higher head) — a neckline break signals the prior trend is reversing.
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