Head and Shoulders Chart Pattern

Market Terms

We don't know everything about the markets.  We're just devoted to learners.  Taken from those smarter than ourselves, here's how we define Head and Shoulders Chart Pattern.

A fairly reliable bullish-to-bearish trading pattern.  It is formed by three peaks, with the outer two peaks close in height and the middle peak the highest.  It is generally taken as a trend reversal pattern.  After a long bullish trend, the prices rise to a peak and subsequently decline into a trough, often marked by a head and shoulders pattern.  An inverse head and shoulders pattern is also a reliable indicator that a downtrend is nearing a reversal.