what is the head and shoulders pattern 
a head and shoulders pattern is used in technical analysis it is a specific chart formation that predicts a bullish to bearish trend reversal the pattern appears as a baseline with three peaks where the outside two are close in height and the middle is highest the head and shoulders pattern forms when a stock s price rises to a peak and then declines back to the base of the prior up move then the price rises above the previous peak to form the head and then declines back to the original base finally the stock price peaks again at about the level of the first peak of the formation before falling back down 1the head and shoulders pattern is considered one of the most reliable trend reversal patterns it is one of several top patterns that signal with varying degrees of accuracy that an upward trend is nearing its end investopedia jiaqi zhouunderstanding the head and shoulders patterna head and shoulders pattern has four components the first and third peaks are the shoulders and the second peak forms the head the line connecting the first and second troughs is called the neckline 1the opposite of a head and shoulders chart is the inverse head and shoulders also called a head and shoulders bottom it is inverted with the head and shoulders bottoms used to predict reversals in downtrends this pattern is identified when the price action of a security meets the following characteristics an inverse head and shoulders pattern is also a reliable indicator signaling that a downward trend is about to reverse into an upward trend 1 in this case the stock s price reaches three consecutive lows separated by temporary rallies of these the second trough is the lowest the head and the first and third are slightly shallower the shoulders the final rally after the third dip signals that the bearish trend has reversed and prices are likely to keep rallying upward 