PERSONAL FINANCE & LIFESTYLE BUSINESS

What Does Head And Shoulders Pattern Mean?

A technical analysis term used to describe a chart formation in which a stock’s price:1. Rises to a peak and subsequently declines.
2. Then, the price rises above the former peak and again declines.
3. And finally, rises again, but not to the second peak, and declines once more.

The first and third peaks are shoulders, and the second peak forms the head.

Investopedia explains Head And Shoulders Pattern

The “head-and-shoulders” pattern is believed to be one of the most reliable trend-reversal patterns.

 

Now let’s take this pattern and flip it upside down to use it to find a negative trend reversal. Here are couple of chart I’ve draw up using charts of CLWR and AMD; showing possible upside-down head and should patterns.

 

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1 COMMENT
InvestingAmateur
March 14, 2011
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Cool man! Great to know the term and thanks for the charts!! Great post! :)

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