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A Head and Shoulders Top is considered a bearish signal. It indicates a possible reversal of the current uptrend to a new downtrend. A perfect example of the pattern has three sharp high points, the middle one being the highest, created by three successive rallies in the price of the financial instrument. The technical event occurs when the resistance marked by the neckline is "broken", thereby confirming the pattern.

Description

The Head and Shoulders Top is an extremely popular pattern among investors because it's one of the most reliable of all formations. It also appears to be an easy one to spot. Novice investors often make the mistake of seeing Head and Shoulders everywhere. Seasoned technical analysts will tell you that it is tough to spot the real occurrences. MORE...

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