Trade Stock Indices

Reversal Setups: Head and Shoulders and Reverse Head Shoulders

Head & shoulders Pattern

This pattern in stock charts indicates a reversal, emerging after a prolonged upward movement. It consists of three successive peaks known as the left shoulder, the head, and the right shoulder, with two moderate low points situated between these shoulders.

The head and shoulders pattern finishes when price drops below the neckline. Connect the two troughs between shoulders to draw it.

To go short, traders set their sell stop orders just below the neck-line.

Summary:

  • This setup forms after an extended move upwards
  • This formation indicates that there'll be a reversal in the stock trading market
  • This setup resembles head with shoulders thus its name.
  • To draw the neck-line we use point 1 & point 2 such as shown below. We also extend the line in both directions.
  • We sell when stock price breaks out below the neck-line point: see the trading chart below for an explanation.

Reversal Patterns: Head Shoulders Chart Setups and Reverse Head Shoulders Chart Setups

Head and shoulders can tilt on a sloped neckline. The stock example below shows how.

Slanting Head and Shoulders Setup and Pattern

Example of Head and Shoulder Chart Setup on a Trade Chart

Example of Head Shoulders Chart Setup on a Chart

Head and Shoulders Chart Setup

This pattern in stock charts can also happen on a neck line that slopes: like the one shown, the neck-line does not have to be flat.

Reverse Head and Shoulders Chart Setup

This chart configuration represents a classic reversal pattern known as the Head and Shoulders, typically surfacing after a prolonged downtrend. Visually, it resembles an inverted head and shoulders structure.

This pattern setup is considered complete once stock price penetrates above neck-line, which's drawn by connecting these 2 peaks in between the reverse shoulders pattern.

To go long buyers/bulls set their buy stop pending orders just above neck-line.

Summary:

  • This pattern setup forms after an extended move downward
  • This pattern indicates that there'll be a reversal in the stocks trading market
  • This setup formation resembles up-side down, thenceforth the name Reverse.
  • We buy when stock price breaks above the neck-line point: see the trading chart below for an explanation.

How to Analyze Reverse/Inverse Head & Shoulders Setup and Pattern

Example of Reverse Head & Shoulders Chart Setup on a Trade Chart

Reverse/Inverse Head & Shoulders Chart Setup in Stock Index Trade

Example of Reverse Head Shoulders Chart Setup

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