Head And Shoulders Chart Formations?
A head and shoulders pattern is a very strong trend reversal formation. The pattern consists of a left shoulder, the head and a right shoulder. This formation is formed when a stock rallies and forms a top, which is the left shoulder, followed by a minor correction and then a rally to a higher peak, which is the head. Following another retreat, the stock rallies again on lower volume and forms the right shoulder. Usually the peak of the right shoulder is lower than the head and lower than the left shoulder. When this pattern develops, the chartist draws a straight line which connects the bottoms created during the corrective phases following the formation of the left shoulder and the head. This line is known as the neckline. After forming the right shoulder if the stock breaks through the neckline, a trend reversal is highly probable. If the neckline is not penetrated, a significant price rise is very likely. To determine the initial price objective, total the number of points from the
