What Does Head & Shoulders Chart Pattern Mean?

Head & Shoulders Chart Pattern is a reversal setup which forms after an extended Gold upward trend.

Head & Shoulders Pattern is made up of three consecutive peaks, the left shoulder, the head & the right shoulder with 2 moderate troughs between the two shoulders.

To open a sell trade after this head and shoulders reversal trading signal, traders place their sell stop orders just below neckline.

Summary:

• This Head & Shoulders Pattern forms after an extended move upward - gold upward trend
• This Head & Shoulders Chart Pattern formation indicates that there will be a reversal in the market
• This Head & Shoulders Chart Pattern formation looks like a head with shoulders thus its name.
• To draw the neck-line we use chart point 1 & point 2 as illustrated on the example shown and explained below. We also extend this line in both directions.
• We sell when the price breaks-out below the neck-line: as described on the example shown and explained below.

What Does Head & Shoulders Setup Mean?

Or the head & shoulders chart pattern can also form on a slanting neck line, like the example illustrated & explained below:

What Does Head & Shoulders Setup Mean?

Examples of Head & Shoulders Pattern on a Chart

How to Analyze the Head & Shoulders Chart Pattern

This Head & Shoulders Chart Pattern can also be formed on a slanting neck line, like the head and shoulders trading pattern examples above, the neck line does not have to be necessarily horizontal.