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Head & Shoulders Pattern

Head and shoulders pattern:

It is a reversal pattern that comes at the end of the bullish trend and consists of three peaks, the middle of which is higher than the other two peaks, and the middle peak is called the head, and the other two peaks are called the right shoulder and the other is the left shoulder.




Model Explanation:

Before the bullish trend ends, signs of weakness begin to appear, and the seller enters to bring the price down and the left shoulder of the pattern is formed

Then the buyer returns to raise the price again and is able to penetrate the last top, forming the first pivot of the pattern's neckline

The seller returns strongly to fall in the price, forming the last top in the bullish trend, and reaches the price to the second anchor of the neckline

Then the buyer finds himself at a good support level, from which he climbs with a return to hope, but it is the last breath for him

As he is surprised by the entry of the seller to prevent him from exceeding the last peak and fall in the price, forming a lower peak than the previous peak, which is the right shoulder of the pattern.

The buyer does not find any fortifications for him except the neckline, by breaking it the hopes of the buyer will be lost in the continuation of the upward trend so that the seller will win and announce the change of trend from bullish to bearish.




How to trade on the model:

The entry is sold after breaking the neckline and closing below it. The distance between the highest peak and the neckline is measured to be dropped below the neckline and the target of the pattern is the stop loss or the top of the right shoulder.


Important note: the same method applies to the bearish trend.



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