Technical Analysis of Head and Shoulders Chart Patterns

How to Analyze Head and Shoulders Chart Patterns

Head & Shoulders Stock Indices Chart Pattern

Head & Shoulders Chart Pattern is a reversal stock indices chart pattern that forms after an extended Indices Trading upward trend.

Head and Shoulders Pattern is made up of 3 consecutive peaks, left shoulder, head and right shoulder with two moderate troughs between the two shoulders.

This Head and Shoulders Pattern is considered complete once stock indices price penetrates below neckline, which is plotted by joining these two troughs between the shoulders.

To open a sell indices trade after this reversal indices trading signal, Indices traders place their sell stop orders just below the neck line.

Summary:

• This Head & Shoulders Chart Pattern forms after an extended move upwards -indices upward trend
• This Head and Shoulders Pattern formation indicates that there will be a reversal in the stock indices trading market
• This Head and Shoulders Pattern formation looks like a head with shoulders thus its name.
• To draw the neck-line we use chart point 1 and point 2 as illustrated on the stock indices trading examples explained below. We also extend this line in both directions.
• We sell when stock indices price breaks out below the neck line: as described on the stock indices example explained below.

Technical Analysis of Head and Shoulders Patterns?

Or the head & shoulders stock indices pattern can also form on a slanting neckline, like the stock indices example explained below:

Technical Analysis of Head and Shoulders Patterns?

Examples of Head and Shoulders Indices Pattern on a Indices Chart

How to Analyze Head and Shoulders Chart Patterns?

This Head & Shoulders Chart Pattern can also be formed on a slanting neckline, like the head and shoulders stock indices chart pattern examples above, the neckline does not have to be necessarily horizontal.