Reversal Chart Patterns: Head and Shoulders & Reverse Head Shoulders

Head and shoulders Trading Chart Pattern

This is a reversal trading pattern which forms after an extended upward silver trend. It's made up of 3 consecutive peaks, the left shoulder, the head and right shoulder with 2 moderate troughs between the shoulders.

This silver trading pattern is considered complete once price penetrates and moves below the neck-line, which is drawn by joining the two troughs in between the shoulders pattern.

To go short, traders place their sell stop trade orders just below neck line.

Summary:

• This pattern forms after an extended move upwards
• This formation indicates that there will be a reversal in trading market
• This formation resembles head with shoulders thus its name.
• To draw the neckline we use chart point 1 & point 2 as displayed below. We also extend this line in both directions.
• We sell when price breaks below the neckline point: see the chart below for explanation.

Or the head and shoulders can also form on a slanting neck line, like the trading example explained and shown below:

Example of Head and Shoulders Pattern on a Chart

Head & Shoulders Pattern

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

Reverse Head and Shoulders Trading Chart Pattern

This is a reversal head and shoulders pattern which forms after an extended downward silver trend. It resembles an upside down head shoulders.

This silver trading pattern is considered complete once price penetrates above the neckline, which is drawn by connecting these two peaks between the reverse shoulders pattern.

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

Summary:

• This pattern forms after an extended move downwards
• This formation indicates that there will be a reversal in trading market
• This formation resembles upside-down, thus the name Reverse.
• We buy when price breaks above the neckline point: see the chart below for explanation.

Examples of Reverse Head and Shoulders Pattern on a Chart

Examples of Reverse Head and Shoulders Pattern