Head and Shoulders Explained
Head and shoulders is a three-peak reversal pattern — a higher middle peak between two lower ones — that signals a trend has run out of buyers.
What the pattern looks like
A classic head and shoulders top forms after an uptrend: a left shoulder (a peak), a higher head, then a lower right shoulder, with the two dips between them defining a neckline. It shows each successive rally failing to make progress — the hallmark of exhausted demand.
The inverse head and shoulders is the mirror image at the bottom of a downtrend: three troughs with a lower middle one, signalling a bottom. Same logic, flipped.
Neckline and measured target
The signal is a close through the neckline — the line connecting the two intervening lows (or highs for the inverse). A wick through that closes back is not confirmation, it may be a liquidity sweep.
The measured move projects the height from the head to the neckline downward from the break point, giving a target. Combine it with support and resistance for a realistic exit rather than trusting the projection blindly.
See it live in Chart Bound
Chart Bound is our free game that trains exactly this — reading real charts one level at a time, with instant feedback. The fastest way to make head and shoulders click. No card, no catch.
Play Chart Bound free → Try today's Call the Candle →Frequently asked questions
What does a head and shoulders pattern signal?
A trend reversal. A head and shoulders top signals the end of an uptrend; the inverse head and shoulders signals the end of a downtrend, confirmed on a neckline break.
How do I measure the target?
Measure the vertical distance from the head to the neckline, then project that same distance from the point where price breaks the neckline.
Is the pattern confirmed by a wick through the neckline?
No. Confirmation requires a candle close beyond the neckline. A wick that closes back inside is more likely a false break or liquidity sweep.