The head and shoulders is one of the most reliable reversal patterns in technical analysis. It consists of three peaks — a higher central peak (the head) flanked by two lower peaks (the shoulders) — connected by a neckline drawn across the reaction lows. A break below the neckline confirms the reversal, with the measured target equal to the distance from the head to the neckline projected downward from the breakout point.
Left shoulder: first rally and pullback. Head: higher rally and deeper pullback to neckline. Right shoulder: lower rally failing near the left shoulder's high. Neckline: support connecting the two reaction lows. Volume profile: declining volume on each successive peak. Inverse head and shoulders: bullish mirror version forming at market bottoms.
Enter short on a confirmed close below the neckline with expanding volume. Wait for a retest of the broken neckline as new resistance for a lower-risk entry. Right shoulder should form on declining volume relative to the head. For inverse patterns, enter long on a close above the neckline with volume confirmation.
Primary target equals the vertical distance from the head to the neckline, projected from the breakout point. Place stop-loss above the right shoulder for short trades. Consider partial profits at 50% of the measured move. Invalidation occurs if price reclaims the neckline with conviction.
1H, 4H, Daily, Weekly
The most reliable head and shoulders patterns form after a sustained trend lasting several weeks or months — patterns that form in ranging markets carry less weight. Symmetry between the shoulders adds reliability, but perfect symmetry is not required. Always confirm the neckline break with a volume spike.
The rounding bottom (also known as a saucer pattern) is a long-term bullish reversal formation characterised by a gradual, U-shaped transition from a downtrend to an uptrend. The pattern reflects a slow shift in sentiment from bearish to neutral to bullish, typically forming over weeks or months. A breakout above the pattern's resistance (the left rim level) confirms the reversal.
Double tops and double bottoms are two-touch reversal patterns that form when price tests the same level twice and fails to break through. A double top signals bearish reversal after an uptrend, while a double bottom signals bullish reversal after a downtrend. The pattern is confirmed when price breaks the support or resistance level formed between the two peaks or troughs.
Bull and bear flags are continuation patterns consisting of a sharp price move (the flagpole) followed by a brief, counter-trend consolidation channel (the flag). Bull flags slope downward after an upward pole; bear flags slope upward after a downward pole. These patterns represent a pause in strong momentum before the trend resumes, and they are among the most commonly traded continuation setups.
Broadening patterns, also called megaphone or expanding patterns, form when price creates progressively higher highs and lower lows, diverging rather than converging. These patterns reflect increasing volatility and disagreement between buyers and sellers, often appearing during periods of uncertainty or at major market turning points. Broadening patterns are among the most challenging formations to trade because they lack the contracting structure of typical chart patterns.