7.27What is Head and Shoulders?
1What is it?
Head and shoulders has three peaks: a left shoulder, a higher head, and a lower right shoulder. A break below the neckline (joining the dips) confirms a bearish reversal. The upside-down version (inverse H&S) is bullish.
2Why does it exist?
Buyers make a final high (head) but can’t repeat it (right shoulder), so momentum is fading.
3Diagram
4Quick revision
- Three peaks, middle highest.
- Neckline break confirms.
- Inverse version is bullish.
5Knowledge check
Q1. Which peak is highest?Show answer
The head (middle).
Q2. What confirms the pattern?Show answer
A close below the neckline.
Q3. What does inverse H&S signal?Show answer
A possible bullish reversal.