Head and Shoulders

(redirected from Head and Shoulders Pattern)
Also found in: Dictionary.
Related to Head and Shoulders Pattern: Cup and Handle Pattern

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.
References in periodicals archive ?
Typically, the head and shoulders pattern is characterised by the following:
Once the head and shoulders pattern is complete, a common method by technical analysts is to place buy orders just outside the 'neckline' to capitalise on potential breakouts to the upside.
The AUD/USD was lacking direction after a false head and shoulders pattern.
An inverse Head and Shoulders pattern is a <strong>bullish reversal pattern</strong>&nbsp;and for the pattern to be reliable, it should occur in a downtrend.
Summary: The GBPUSD sports a short term inverse head and shoulders pattern.
It is not confirmed that a low is in place, but a potential inverse head and shoulders pattern has formed.
A Head and Shoulders pattern is a <strong>bearish reversal pattern</strong>&nbsp;and for the pattern to be reliable, it should occur in an uptrend.
Summary: We've been watching the GBPUSD closely of late due to head and shoulders patterns at various degrees of trend.