Head and Shoulders

A head and shoulders is a topping pattern made of three peaks: a left shoulder, a higher head, and a right shoulder that fails to reach the head's high, all connected underneath by a support line called the neckline. The pattern completes only when price closes below the neckline; before that it is just three bumps.

The structure encodes a specific failure sequence. Buyers made a high, made a higher high, then could not even match the old high on the third try, and each rally attracted less demand. The right shoulder forming on lighter volume than the left strengthens the read. An inverse head and shoulders, the same shape flipped upside down at a low, carries the bottoming version of the logic.

The conventional target projects the head-to-neckline distance downward from the break. Studies of pattern reliability put completed head and shoulders among the better performers, but completed is the operative word; most almost-patterns never break the neckline and simply resolve back up.