InvestorQ : What exactly is a Head and Shoulders pattern and what does it depict? How do we interpret a Head and Shoulders pattern?
prachi Patwardhan made post

What exactly is a Head and Shoulders pattern and what does it depict? How do we interpret a Head and Shoulders pattern?

Answer
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1 year ago


One of the popular technical indicators is a chart pattern called the Head and Shoulders. A “head and shoulders” means that there are 3 peaks in your chart pattern—the middle peak is the highest (head) with two relatively equal lower peaks beside it (shoulders). It approximately resembles a head with two lower shoulders. This pattern signals a trend reversal, with the line connecting the two “shoulders” as the key support level to watch. If you see the price break below that level, expect a trend reversal or breakdown of the stock. Head and Shoulders are used to confirm a trend reversal in the charts. An inverse head and shoulders may also signal that a stock that has been in a prolonged down trend is about to change to an uptrend.