What is a shoulder and a head in a stock market?

The first “shoulder” forms after a significant bullish period in the market when the price rises and then declines into a trough. The “head” is then formed when the price increases again, creating a high peak above the level of the first shoulder formation.

What is a head and Shoulders pattern?

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.

How reliable is a head and shoulders chart?

The head and shoulders chart is said to depict a bullish-to-bearish trend reversal and signals that an upward trend is nearing its end. Investors consider it to be one of the most reliable trend reversal patterns. How Reliable Is a Head and Shoulders Pattern?

What is the opposite of a head and shoulders chart?

The 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: