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Reversal Chart Patterns Head and Shoulders & Reverse Head and Shoulders

Head and Shoulders Reversal Chart Pattern


This is a reversal chart pattern that forms after an extended Gold price upward trend. It is made up of three consecutive peaks, the left shoulder, the head and the right shoulder with two moderate troughs between the shoulders.


This Head and Shoulders Reversal Chart Pattern is considered complete once price penetrates below the neckline, which is plotted by joining the two troughs between the shoulders.


To go short, Gold traders place their sell stop orders just below the neckline.

 

Summary:
This reversal chart pattern forms after an extended move upwards


This formation indicates that there will be a reversal in the market


This formation resembles head with shoulders thus its name.


To plot the neckline we use chart point 1 and point 2 as shown below. We also extend this line in both directions.


We sell when price breaks below the neckline; see the chart below for explanation.

 

Or the head and shoulders can also form on a slanting neckline, like the example below:

 

 

Example of Head and Shoulders Pattern on a Gold Price Chart

Head and Shoulders Chart Pattern

 


This reversal chart pattern can also be formed on a slanting neckline, like the one above, the neckline does not have to be necessarily horizontal.

 

 

Reverse Head and Shoulders Reversal Chart Pattern

This is a reversal head and shoulders chart pattern that forms after an extended Gold downward trend. It resembles an upside-down head and shoulders pattern.


This Head and Shoulders Reversal Chart Pattern is considered complete once price penetrates above the neckline, which is plotted by joining the two peaks between the reverse head and shoulders pattern.


To go long buyers place their buy stop orders just above the neckline.

 

Summary:
This reversal chart pattern forms after an extended move downwards


This formation indicates that there will be a reversal in the market


This formation resembles an upside-down head and shoulders pattern, thus its name Reverse.


We buy when price breaks above the neckline; see the chart below for explanation.

 

 

Example of Reverse Head and Shoulders Chart Pattern on a Gold Price Chart

Reverse Head and Shoulders Chart Pattern


 

Technical Analysis