Reversal Chart Patterns: Head and Shoulders & Reverse Head Shoulders
Head and shoulders Energies Trading Chart Pattern
This is a reversal chart pattern which forms after an extended Energies Trading upwards trend. It is made up of three consecutive peaks, the left shoulder, the head & right shoulder with two moderate troughs between the shoulders.
This energies pattern is considered complete once energy price penetrates and moves below the neck line, which is plotted by joining these two troughs between the shoulders.
To go short, Energies traders place their sell stop orders just below the neckline.
Summary:
- This Energies Trading pattern forms after an extended move upwards
- This formation indicates that there will be a reversal in energies market
- This formation resembles head with shoulders thus its name.
- To draw the neckline we use chart point 1 & point 2 as shown below. We also extend this line in both directions.
- We sell when price breaks below the neck line: see the trading chart below for explanation.
Or the head and shoulders can also form on a slanting neckline, like the energies example illustrated and explained below:
Example of Head and Shoulders Pattern on a Energies Trading Chart
Head and Shoulders Pattern
This energies chart pattern can also be formed on a slanting neckline, like the one above, the neck line does not have to be necessarily horizontal.
Reverse Head and Shoulders Chart Pattern
This is a reversal head and shoulders pattern which forms after an extended Energies Trading downwards trend. It resembles an upside-down head shoulders.
This energies pattern is considered complete once energy price penetrates above the neck line, which is plotted by joining these two peaks between the reverse shoulders pattern.
To go long buyers place their buy stop pending orders just above neckline.
Summary:
- This Energies Trading pattern forms after an extended move downwards
- This formation indicates that there will be a reversal in energies market
- This formation resembles upside down, hence the name Reverse.
- We buy when price breaks above the neckline: see the chart below for explanation.
Example of Reverse Head and Shoulders Pattern on a Energies Trading Chart
Example of Reverse Head and Shoulders Pattern
