Head and ShouldersH&S
Head and shoulders is a reversal pattern of three peaks with the middle one highest; the inverse version, with three troughs, can mark the end of a downtrend.
Head and shoulders is the best-known reversal pattern in technical analysis. After an uptrend, the price makes a peak (the left shoulder), a higher peak (the head) and a lower peak (the right shoulder).1 The lows between them form the neckline. When the price closes below the neckline, the pattern is complete and suggests the uptrend has ended. The inverse version marks bottoms. This entry shows how to identify the pattern, where traders enter, and how the common target is calculated.
- Category
- Price Action
- Reading time
- 5 min
- Also called
- Inverse head and shoulders, Neckline, Head and shoulders top
- Updated
Head and shoulders in plain words
Buyers push to a high, then a higher high — but the third push fails to reach the head. That failure is a lower high, the first sign that buying is running out. See Reversal.
The neckline connects the two lows on either side of the head. Breaking below it means the price has also made a lower low — the uptrend’s structure is broken. See Trend.
How to trade head and shoulders, step by step
Confirm there was an uptrend
A top pattern needs something to reverse.
Identify the three peaks
The head must be clearly higher than both shoulders; the shoulders roughly similar.
Draw the neckline
Connect the lows between the shoulders and the head; it can slope slightly.
Wait for a close below the neckline
Until then, the pattern is incomplete and the uptrend may resume.
Calculate the target
Measure from the head to the neckline and project that distance down from the break.
Place the stop
Above the right shoulder, or above the neckline for a retest entry. See Stop Loss.
Worked examples
Example 1 — Measuring the target
TargetLeft shoulder $55, head $62, right shoulder $56, neckline $50.50.
| Head to neckline | $62 − $50.50 = $11.50 |
| Target | $50.50 − $11.50 = $39.00 |
The measured move is a rule of thumb for where the decline might reach, not a guarantee. See Take Profit.
Example 2 — A short on the break
Break entryThe price closes at $49.50, below the neckline. A trader shorts at $49.50, stop $56.50 above the right shoulder, target $39.
| Risk | $7.00 |
| Reward | $10.50 |
| Reward-to-risk | 1.5 : 1 |
Stops above the right shoulder are safe but wide. Some traders wait for a retest of the neckline from below for a tighter stop.
Example 3 — A failed pattern
FailureA stock forms what looks like a head and shoulders, dips 20 cents below the neckline intraday, then closes back above it and rallies to a new high.
| Close below neckline? | No — only an intraday poke |
| Result for early shorts | Stopped out as the uptrend resumed |
Waiting for a close below the neckline filters out many failures. A failed top can itself become a bullish signal.
Head and shoulders top
Head and shoulders top vs. inverse
| Aspect | Top | Inverse (bottom) |
|---|---|---|
| Appears after | An uptrend | A downtrend |
| Shape | Three peaks, middle highest | Three troughs, middle lowest |
| Confirmation | Close below the neckline | Close above the neckline |
| Target | Neckline − head height | Neckline + head depth |
How traders use the pattern
Exiting longs
A completed pattern is a reason to close or tighten long positions.
Short entries
On the neckline break or a retest. See Short Selling.
Bottom entries
The inverse pattern marks possible ends of downtrends.2
Targets
The measured move gives a first target.
Advantages and disadvantages
Advantages
- Clear structure: lower high plus broken neckline.
- Built-in stop and target levels.
- Widely recognised, so many traders watch the same levels.
Disadvantages
- Often recognised only late, after much of the move.
- Subjective: what counts as a shoulder varies.
- Many patterns fail or never complete.
- Stops above the right shoulder can be wide.
Going deeper
Read as far as you need. Each level builds on the one before it.
No neckline break, no pattern
Beginner
Until the neckline breaks on a closing basis, you have three peaks — not a completed head and shoulders.
Volume
Intermediate
In the classic pattern, volume is often lighter on the right shoulder than on the head, and rises on the neckline break. See Volume.
Sloping necklines and retests
Advanced
A downward-sloping neckline on a top is generally considered weaker for buyers (more bearish). After a break, prices often retest the neckline from the other side, where old support acts as resistance. See Support and Resistance.
Common mistakes
Shorting before the break
Anticipating the pattern catches many false tops.
Seeing patterns everywhere
Insist on a prior trend and a clearly higher head.
Ignoring the target distance
If the nearest support is closer than the target, reward-to-risk may not justify the trade.
Stops too tight
A stop just above the neckline is often hit on the retest.
Check your understanding
Test yourself before moving on. Each answer comes with an explanation.
Key points to remember
- Three peaks with the middle one highest, after an uptrend.
- The neckline joins the lows between the peaks.
- A close below the neckline completes the pattern.
- Target: head-to-neckline distance projected from the break.
- The inverse pattern marks possible bottoms.
Frequently asked questions
Is head and shoulders bullish or bearish?
How reliable is head and shoulders?
What if the price comes back above the neckline?
Further learning
- Reversal
The broader idea this pattern belongs to.
- Double Top and Double Bottom
A simpler two-peak reversal pattern.
- Support and Resistance
Why the neckline matters after it breaks.
- Breakout
Neckline breaks behave like breakouts — including false ones.
Sources
This article is written in our own words. The sources below support the specific facts, rules and figures marked with a number in the text. Links open the original publisher’s page.
- StockCharts ChartSchool. Head and Shoulders Top (opens in a new tab) Checked .
- StockCharts ChartSchool. Head and Shoulders Bottom (opens in a new tab) Checked .
Read more elsewhere
- Trading Metrics (our sister site): Head and Shoulders (opens in a new tab)
Educational content, not financial advice. Examples use hypothetical prices and simplified costs; actual fees, margin rules and regulations vary by broker, market and country. Trading Metrics is our sister site, under the same ownership; we are not affiliated with any other publisher linked above. Last reviewed . Report an error or request a source credit.