Head and Shoulders top
Visual Representation
The Head and Shoulders Top Chart Pattern is made up of left shoulder, a head, as well as a right shoulder. The Neckline will be the line that is connecting both lows of the formation also called valleys. The neckline is often times formed as a double bottom, though the price-levels of the two lows may also be different. We would call this an up-sloping or down-sloping neckline. Head and Shoulders Top
Psychological Movements
The left shoulder is made after an extensive turn to the upside. Bears then push the value down forming the first valley. The Bulls take over again, reaching a higher high in the market, forming the head. The Bears stop the move and push the cost down to form the second valley. The correct shoulder is shaped when price rises again but remains below the high of the head. Inside a last move price is pushed down with high pressure of the Bears and finally breaks the neckline to the downside.
Trade Management
We enter a trade, only after the Head and Shoulders Top Pattern has completed and expense closes below the neckline. The stop loss rests above the right shoulder. The gain target for the pattern equals the move from the head to the neckline. Head and Shoulders
One Note
In your Trading the up-sloping Head and Shoulders Top Chart Pattern outperforms the double bottom or down sloping Head and Shoulders Chart Pattern.
