Head and Shoulders


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Head and Shoulders

In technical analysis, an indicator in which the price of a security rises to a peak, falls, rises to a higher peak and then falls again, and, finally, rises to a third peak roughly equal to the first and falls again. While, in general, a head and shoulders pattern is considered a bearish indicator, it contains various bullish points, namely immediately before the price rises. These bullish points are called the neckline. When technical analysts see a security falling toward the neckline, they view this as a buy signal because historical patterns have shown that the security's price will rise soon thereafter. On the other hand, the third peak is considered a sell signal.
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The Head and Shoulders* The head and shoulders is the best known and probably the most reliable of the reversal patterns.
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