Reversal Chart Patterns: Head and Shoulders and Reverse Head Shoulders

Head and shoulders Trading Pattern

This is a reversal crude trading pattern that forms after an extended Oil Trading upward trend. It's made up of 3 consecutive peaks, left shoulder, head and the right shoulder with 2 moderate troughs between the shoulders.

This oil setup is considered complete once price penetrates and moves below the neckline, which is drawn by joining the two troughs in between the shoulders chart pattern setup.

To go short, traders place their sell stop crude trade orders just below neckline.

Summary:

• This Oil Trading pattern forms after an extended move upwards
• This formation indicates that there will be a reversal in the crude trading market
• This formation resembles head with shoulders thus its name.
• To draw the neck-line we use chart point 1 & point 2 as displayed below. We also extend this line in both directions.
• We sell when price breaks below the neckline point: see the chart below for explanation.

Or the head and shoulders can also form on a slanting neck line, like the example shown below:

Example of Head and Shoulders Pattern on a Trading Chart

Head & Shoulders Pattern

This chart pattern can also be formed on a slanting neck line, like the one above, the neck line doesn't have to be necessarily horizontal.

Reverse Head and Shoulders Pattern

This is a reversal head and shoulders pattern that forms after an extended Oil Trading downward trend. It resembles an upside down head shoulders.

This oil setup is considered complete once price penetrates above the neckline, which is plotted by connecting these 2 peaks between the reverse shoulders chart pattern setup.

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

Summary:

• This Oil Trading pattern forms after an extended move downwards
• This formation indicates that there will be a reversal in the crude trading market
• This formation resembles upside down, thus the name Reverse.
• We buy when price breaks above the neckline point: see the chart below for explanation.

Examples of Reverse Head and Shoulders Pattern on a Trading Chart

Examples of Reverse Head and Shoulders Pattern