The head and shoulders pattern is a technical analysis formation that typically indicates a reversal in price trends. It consists of three peaks: the left shoulder, the head, and the right shoulder, with the head being the highest peak situated between the two shoulders. This pattern is often seen at the top of an uptrend and suggests a potential trend reversal to a downtrend. The inverse head and shoulders, conversely, indicates a potential bullish reversal at the bottom of a downtrend. Traders commonly use this pattern to identify entry and exit points, although, like all technical patterns, it is not infallible and should be used in conjunction with other indicators for confirmation.
Technical Analysis