What is Head and shoulders?
Bosh va yelkalar
In short
A three-peak reversal pattern with the middle peak (head) highest. Confirmed when the neckline breaks.
Head and shoulders is a classic reversal pattern that appears at the end of an uptrend. It has three peaks: the left shoulder, the highest middle peak (the head) and the right shoulder. The line connecting the lows between them is the neckline.
The logic
The head is the buyers' last strong push. A right shoulder lower than the head shows buyers can no longer make a new high — the same idea as a lower high (LH) in market structure. The pattern is confirmed only when a candle closes below the neckline; until then it is just a possibility.
Calculating the target
- Height = Head high − Neckline
- Target = Neckline − Height
This is the measured move method. The stop usually goes above the right shoulder.
Variants and limitations
The mirror version — inverse head and shoulders — forms at the end of a downtrend and signals a turn up. Price often comes back to retest the neckline after the break. The pattern doesn't always work: the neckline can break and price can quickly reverse. "Wanting to see" the pattern is also a risk — patterns that follow a clear trend and show clear symmetry are more reliable.
Head $120, neckline $104 — height $16, target $88. Volume shrank on each new peak and spiked on the break. Price came back to test $104 from below (retest) and failed — the last comfortable exit for anyone still holding.
Head $38, neckline $50 — height $12, target $62. The break came on volume, then price retested $50 from above. Entry $50.5, stop below the right shoulder ($46) at $45.5: $5 of risk for $11.5 of potential — about 2.3R.
Example
A fictional stock after an uptrend:
- Left shoulder: $60
- Head: $68
- Right shoulder: $61
- Neckline: $55
Height: $68 − $55 = $13. Target: $55 − $13 = $42. Price closes at $54.50, breaking the neckline — the pattern is confirmed. A trader opening a short places the stop above the right shoulder at $61.50: risk $7, potential reward $12.50 — R:R about 1:1.8. For someone holding a long, it is an exit signal.
Mistakes and tips
The pattern isn't complete until the neckline breaks — acting early is often a mistake.
Rising volume on the break strengthens the confirmation.
The target is an estimate, not a guarantee; taking partial profit earlier is reasonable.
Frequently asked questions
- How reliable is the head and shoulders pattern?
- It is one of the best-known reversal patterns, but it also produces many false signals. Waiting for a close below the neckline improves reliability.
- What does an inverse head and shoulders mean?
- It is the mirror pattern at the end of a downtrend and points to a possible turn up. It is confirmed when the neckline breaks to the upside.
Learn it in the Academy
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