The head and shoulders is one of the most reliable reversal patterns in technical analysis. It consists of three peaks — a higher central peak (the head) flanked by two lower peaks (the shoulders) — connected by a neckline drawn across the reaction lows. A break below the neckline confirms the reversal, with the measured target equal to the distance from the head to the neckline projected downward from the breakout point.
Left shoulder: first rally and pullback. Head: higher rally and deeper pullback to neckline. Right shoulder: lower rally failing near the left shoulder's high. Neckline: support connecting the two reaction lows. Volume profile: declining volume on each successive peak. Inverse head and shoulders: bullish mirror version forming at market bottoms.
Enter short on a confirmed close below the neckline with expanding volume. Wait for a retest of the broken neckline as new resistance for a lower-risk entry. Right shoulder should form on declining volume relative to the head. For inverse patterns, enter long on a close above the neckline with volume confirmation.
Primary target equals the vertical distance from the head to the neckline, projected from the breakout point. Place stop-loss above the right shoulder for short trades. Consider partial profits at 50% of the measured move. Invalidation occurs if price reclaims the neckline with conviction.
1H, 4H, Daily, Weekly
The most reliable head and shoulders patterns form after a sustained trend lasting several weeks or months — patterns that form in ranging markets carry less weight. Symmetry between the shoulders adds reliability, but perfect symmetry is not required. Always confirm the neckline break with a volume spike.
Rising and falling wedges are converging trendline patterns where both support and resistance slope in the same direction. A rising wedge (both lines slope upward, converging) is typically bearish, while a falling wedge (both lines slope downward, converging) is typically bullish. Wedges differ from triangles because both trendlines slope in the same direction rather than converging symmetrically.
Triple tops and triple bottoms are reversal patterns where price tests the same level three times before reversing. They are essentially double tops and bottoms with an additional test, making them rarer but potentially more significant. The three-touch structure confirms that a price level is acting as a strong barrier, and the eventual break of the pattern's support or resistance level triggers the reversal.
Diamond patterns are relatively rare reversal formations that combine a broadening pattern followed by a symmetrical triangle, creating a diamond-shaped outline on the chart. They typically appear at market tops (diamond top) or, less commonly, at bottoms (diamond bottom). The pattern signals an exhaustion of trend momentum as volatility first expands then contracts before a decisive breakout.
Bull and bear flags are continuation patterns consisting of a sharp price move (the flagpole) followed by a brief, counter-trend consolidation channel (the flag). Bull flags slope downward after an upward pole; bear flags slope upward after a downward pole. These patterns represent a pause in strong momentum before the trend resumes, and they are among the most commonly traded continuation setups.