Head and shoulders

This is one of the most popular chart patterns for graphical analysis (see). This formation, as the name implies, resembles the line of the shoulder, neck and head of a man. It is popular because it is quite easy to see on the chart (see). If we see that the graph goes right, then "dancing" up a little and then it goes down, you can open the transaction for sale: "head and shoulders" has emerged. Incidentally, this formation is quite versatile and could easily have four shoulders instead of two. If the price draws two "shoulders", went up and went down it will continue as two "shoulders". Traders know that if such a formation appears on the price chart, the uptrend (see) will soon be replaced by a downtrend (see). You can also experience the reverse formation, when the "shoulders" and "head" will be drawn upside down. This "reverse-formation" means that the market is ready to turn around and now will not go down, but up.

Back to list