Reversal Indices Chart Patterns: Head and Shoulders & Reverse Head Shoulders
Head and shoulders Indices Chart Pattern
This is a reversal chart pattern that forms after an extended Indices upward indices trend. It is made up of three consecutive peaks, the left shoulder, the head and the right shoulder with two moderate troughs between the shoulders.
This indices pattern is considered complete once stock indices price penetrates below the neckline, which is drawn by joining these two troughs between the shoulders.
To go short, Indices traders place their sell stop indices orders just below the neckline.
Summary:
- This Indices pattern forms after an extended move upwards
- This formation indicates that there will be a reversal in the stock indices trading market
- This formation resembles head with shoulders thus its name.
- To draw the neckline we use chart point 1 and point 2 as shown below. We also extend this line in both directions.
- We sell when price breaks below the neck line point: see the chart below for explanation.
Or the head and shoulders can also form on a slanting neckline, like the stock indices trading example explained and illustrated below:
Example of Head and Shoulders Pattern on a Indices Chart
Head and Shoulders Pattern
This stock indices chart pattern can also be formed on a slanting neckline, like the one above, the neck line does not have to be necessarily horizontal.
Reverse Head & Shoulders Indices Trading Pattern
This is a reversal head and shoulders pattern that forms after an extended Indices downward indices trend. It resembles an upside-down head shoulders.
This indices pattern is considered complete once stock indices price penetrates above the neckline, which is drawn by joining these two peaks between the reverse shoulders pattern.
To go long buyers place their buy stop indices orders just above the neckline.
Summary:
- This Indices pattern forms after an extended move downwards
- This formation indicates that there will be a reversal in the stock indices trading market
- This formation resembles is upside-down, therefore the name Reverse.
- We buy when price breaks above the neck line point: see the chart below for explanation.
Example of Reverse Head and Shoulders Pattern on a Indices Chart
Example of Reverse Head and Shoulders Pattern
