Definition
The head and shoulders is one of the most recognized chart patterns in technical analysis. In its standard, bearish form it appears after an uptrend and consists of three peaks: a left shoulder, a higher central peak called the head, and a right shoulder roughly level with the left. A line connecting the lows between the peaks forms the neckline.
The pattern is read as a story of fading strength. Each peak is an attempt by buyers to drive price higher; the head is the last and highest, and the lower right shoulder shows that buyers can no longer match it. An inverse, or bullish, version appears upside down after a downtrend and signals a possible bottom.
Why it matters
How it works
As the pattern forms, an analyst watches for the symmetry of the shoulders and the prominence of the head. Volume often declines from the left shoulder to the head and into the right shoulder, hinting that buying conviction is weakening even as price stays elevated.
Confirmation comes when price breaks the neckline — downward for the standard pattern, upward for the inverse — ideally on rising volume. The projected target is the vertical distance from the head to the neckline, measured from the breakout point in the direction of the break. After the breakout, price sometimes returns to retest the neckline before continuing.