Candlestick Patterns
Head and Shoulders Reversal
Two lower peaks flank one higher peak, and the trade doesn't trigger until the line connecting the two troughs between them actually breaks.
Draw the neckline, then test it
Drag the two gold handles onto what you judge to be the two troughs of the formation below (or the two peaks, on the inverse setting). As you move either handle, the sloped neckline and a projected target cone redraw instantly, computed from the head's real high or low against your neckline's current slope. Once you're happy with it, play the chart forward and see what the actual bars did against your own number.
Drag both handles onto the two troughs to set the neckline.
How it works
- Three peaks, one taller than the other two. A left shoulder, a head that prints a higher high (or lower low on the inverse), and a right shoulder that roughly matches the left shoulder's height. Symmetry between the shoulders is a visual cue, not a strict requirement.
- The neckline connects the two reaction points between the peaks, not the peaks themselves. It's a line through the trough after the left shoulder and the trough after the head, and it's frequently sloped, not flat.
- Nothing triggers until price closes through that line. The formation can look complete with the right shoulder in place and still just be range noise until an actual close breaks the neckline's current level, extended forward along its slope.
- The measured move projects the head's distance from the neckline. Take the vertical gap between the head and the neckline at the head's position, then project that same distance beyond the point where price breaks the neckline. That's the target, not a guarantee.
- A steeper neckline changes the target more than most traders expect. Because the neckline is a slope, not a fixed price, where you choose to break it changes the projected target. Drag the handles and watch the target number move to see how sensitive the projection is to the line you draw.
Where this breaks
A sloped neckline lets the pattern "break" well before real conviction shows up
A downward-sloping neckline on a top formation keeps lowering the trigger price bar by bar, which means a close can technically break it on a small, low-volume drift lower rather than a real decisive move. Traders drawing the neckline too aggressively, tilting it to fit the most recent trough instead of the actual reaction low, end up with a trigger that fires early and often on noise. The measured-move target then gets projected from a line that was never really tested by the market, and price frequently stalls well short of it, undershooting because the "breakout" wasn't a breakout at all, just the neckline sinking to meet an unremarkable close.