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Head and Shoulders Pattern

Reversal pattern · ~5 min read

The Head and Shoulders pattern is one of the best-known reversal patterns in technical analysis. After an uptrend it signals a possible turn to the downside – the inverse version signals the opposite after a downtrend.

Structure of the pattern

It consists of three highs: a left shoulder, a higher head in the middle, and a right shoulder at roughly the same height as the left. The two lows between the highs are connected by the neckline.

• Left shoulder: first high, then a pullback.
• Head: higher high – the buyers' last push.
• Right shoulder: lower high – buyers fail to make a new high.
• Neckline: connects the two interim lows; its break confirms the pattern.

Meaning & price target

Only the break of the neckline confirms the Head and Shoulders pattern. The classic target comes from the head height: the distance from the top of the head to the neckline is projected down (or up, for the inverse version) from the breakout point.

Common mistakes

• Trading the pattern before the neckline breaks – many suspected H&S never complete.
• Accepting very uneven shoulders – the more symmetric, the more reliable.
• Ignoring the prior trend – without a preceding uptrend it is not a true reversal.