• Day Trader Resources

#1 of 10 Chart Patterns Every Trader Needs to Know - Head and Shoulders

Updated: Mar 7

Chart patterns are an integral aspect of technical analysis, but they require some getting used to before they can be used effectively. We would rank this #1 out of the top 10 patterns every trader needs to know. The famous Head and Shoulders Chart Pattern.

Head and Shoulders Pattern

The head and shoulder is a chart pattern in which a large peak has a slightly smaller peak on either side of it. Traders look at head and shoulders patterns to predict a bullish-to-bearish reversal.

Most common, the first and third peaks will be smaller than the middle (or second peak) but all peaks in the pattern will fall back to the same support level, otherwise known as the pattern's 'neckline'. Once the third peak has fallen back to its level of support, it is very likely (yet not guaranteed) that it will break out into a bearish downtrend.

If you flip the pattern, known as a reversed head-and-shoulder pattern, the same scenario will play out but in favor of a bullish trend.

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