Technical Analysis
Head & Shoulders
A classic reversal pattern with three peaks — left shoulder, head (highest), right shoulder — signalling a shift from uptrend to downtrend.
Key rules
- Three peaks: left shoulder, head (highest), right shoulder
- Right shoulder should be at a similar height to the left shoulder
- Volume should decline from left shoulder → head → right shoulder
- Breakdown confirmed by a close below the neckline on high volume
- Target = neckline − (head to neckline distance)
The head and shoulders pattern is one of the most well-known reversal formations in technical analysis. It appears at the top of an uptrend and consists of three peaks: a left shoulder, a higher central peak (the head), and a right shoulder roughly equal in height to the left.
**Neckline** The neckline connects the lows between the left shoulder and the head, and between the head and the right shoulder. This is the critical trigger level.
**Symmetry** The right shoulder should form at a similar price level and over a similar time frame as the left shoulder. Perfect symmetry is not required, but significant asymmetry reduces pattern reliability.
**Breakdown & Volume** The pattern is confirmed when price closes below the neckline on expanding volume. Volume typically peaks on the left shoulder, decreases on the head, and is lowest on the right shoulder — reflecting waning buying pressure.
**Measured Move** The target is measured by taking the distance from the head to the neckline and projecting it downward from the neckline breakdown point.