The head and shoulders and its inverse

The head and shoulders Head & Shoulders is among the most famous and most reliable reversal patterns. It is so named because it resembles a head between two shoulders: a high middle peak (the head) between two lower peaks (the shoulders).

The shape and its formation

At the end of an uptrend the standard pattern is drawn like this: price rises to a peak (the left shoulder) then pulls back, rises to a higher peak (the head) then pulls back, then rises to a third peak lower than the head (the right shoulder). The line connecting the two pullback lows is called the neckline.