Reversal Patterns: Head & Shoulders and Reverse Head Shoulders

Head & shoulders Trading Pattern

This is a reversal chart pattern that forms after an extended upwards trend. It is made up of three consecutive peaks, the left shoulder, the head and the right shoulder with two moderate troughs between the shoulders.

This pattern is considered complete once price penetrates & moves below the neck line, which is plotted by joining the two troughs between the shoulders pattern.

To go short, traders place their sell stop trade orders just below neck-line.

Summary:

This Gold pattern setup forms after an extended move upwards
This formation indicates that there'll be a reversal in the market
This formation resembles head with shoulders thus its name.
To draw the neck-line we use chart point 1 and point 2 as shown below. We also extend this line in both directions.
We sell when price breaks out below the neck-line point: see the chart below for explanation.

How to Read Reverse Head & Shoulders Chart Patterns

Or the head and shoulders also can form on a sloping neck-line, like the example shown & described below:

Reversal Chart Setups: Head and Shoulders Pattern & Reverse Head and Shoulders Setup

Example of Head and Shoulders Pattern on a Trading Chart

Reversal Chart Trading Patterns: Head & Shoulders Pattern and Reverse Head & Shoulders Trading Setup

Head & Shoulders Pattern

This chart setup can also be formed on a sloping neck line, like the one above, the neck-line does not have to be necessarily horizontal.

Reverse Head and Shoulders Trading Pattern

This is a reversal head & shoulders pattern that forms after an extended downward trend. It resembles an upside-down head shoulders.

This pattern is considered complete once price penetrates above neck line, which is drawn by joining these two peaks between the reverse shoulders pattern.

To go long buyers place their buy stop trade orders just above neckline.

Summary:

This Gold setup forms after an extended move downwards
This pattern indicates that there will be a reversal in the market
This formation resembles upside down, thus the name Reverse.
We buy when the price breaks-out above neck line point: see the chart below for explanation.

Reversal Chart Setups: Head & Shoulders Pattern and Reverse Head & Shoulders Pattern

Example of Reverse Head & Shoulders Pattern on a Trading Chart

Reversal Chart Trading Setups: Head & Shoulders Pattern and Reverse Head & Shoulders Trading Setup

Example of Reverse Head & Shoulders Pattern

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Trade Gold Trading

Reversal Patterns: Head & Shoulders and Reverse Head Shoulders

Head & shoulders Trading Pattern

Reverse Head and Shoulders Trading Pattern