What Does Head and Shoulders Stock Chart Pattern Mean?
Head & Shoulders Stock Chart Pattern is a reversal stocks pattern which forms after an extended Stock Trading upwards trend.
Head & Shoulders Stock Pattern is made up of three consecutive peaks, the left shoulder, the head & the right shoulder with two moderate troughs between the two shoulders.
To open a sell stock trade after this head and shoulders reversal stock trading signal, Stock traders place their sell stop stock orders just below the neck line.
Summary:
- This Head & Shoulders Stock Pattern forms after an extended move upward - stock upward trend
- This Head & Shoulders Stock Pattern formation indicates that there will be a reversal in the stock market
- This Head & Shoulders Stock Chart Pattern formation looks like a head with shoulders thus its name.
- To draw the neckline we use chart point 1 & point 2 as illustrated on the stocks example illustrated & explained below. We also extend this line in both directions.
- We sell when stocks price breaks-out below neckline: as described on the stocks examples illustrated & described below.
What Does Head and Shoulders Stock Chart Pattern Mean?
Or the head & shoulders stocks pattern can also form on a slanting neck line, like the stocks examples illustrated & described below:
What Does Head and Shoulders Stock Chart Pattern Mean?
Examples of Head and Shoulders Stock Trading Pattern on a Stock Chart
How to Analyze the Head and Shoulders Stock Chart Pattern
This Head & Shoulders Stock Chart Pattern can also be formed on a slanting neck line, like the head and shoulders stocks chart pattern example above, the neckline doesn't have to be necessarily horizontal.
