Head and Shoulders

Head and Shoulders is a bearish chart pattern reflecting exhausted buying momentum. Price forms a recognisable structure at or near resistance, and a confirmed breakdown signals the start of a larger move lower.

What This Pattern Tells You

The pattern forms as buyers repeatedly test a resistance level and fail to break through. Each failed attempt erodes confidence, and sellers begin distributing positions into the buying pressure. When the structure completes, the bears are firmly in control.

How to Trade It

Entry: Short on neckline break.

Stop loss: Stop above right shoulder.

Target: Target = neckline - head height.

Confirmation: Do not act on the pattern alone. Require at least one confirming signal such as a follow-through candle, a volume spike, or a supporting oscillator reading before entering.

When Is It Most Reliable

Bearish chart patterns are most powerful after extended uptrends and near historically significant resistance. A high-volume breakdown candle is the most important confirming signal. An overbought RSI or bearish MACD crossover at formation time adds meaningful weight.

How to Identify It

The following elements must all be present to confirm Head and Shoulders:

• Left shoulder forms and pulls back.
• Head (higher peak) forms and pulls back.
• Right shoulder (similar height to left) forms.
• Breakdown below neckline confirms reversal.

Reliability

With an 88% historical success rate, Head and Shoulders sits in the exceptionally high reliability tier among chart patterns. No technical signal is infallible. Always define your maximum acceptable loss before entering a trade, and honour your stop loss without exception.