Shoulder Head Shoulder Pattern and Inverse Head and Shoulders Pattern

Shoulder head shoulder and Inverse head and shoulders pattern are mostly encountered in technical analysis, and their reliability are high. It can show up in end of the upward trend or downtrend. It is an indicator of end of the trend. Neckline breaks and that give signals of beginning of a powerful propensity towards reverse direction of current trend.

Generally, short term downtrend occurs in end of this formation. Most of the time, transacting with expectation of rising is risky in the graphs which is seen in these formations.

Mark ,which is occured by combining of two peak prices, is expressed as neckline. It is enough that transaction sum increases during passing neckline for making a purchase.

Minimum level of prices (target price) can be guess with passing neckline which is known as breaking point in formation. Formation is completed with passing neckline.

Shoulder Head Shoulder Pattern:

Shoulder Head Shoulder Pattern is a reversal trend formation. It is formed of three hills. Left shoulder begins to occur when prices rally, and trend is upward. After prices make a hill, a small-scale decrease takes place, and left shoulder occurs. Retreatment’s termination level is called as NECK. Rally begins again with purchase coming from neck level, and prices exceed to Neck . Hill is formed in this situation, that is Head. Prices retreat, and come back to Neck level. For the last time, increase is seen in prices, and this increase is seen in left shoulder level or lower than it.So, RÄ°GHT SHOULDER occurs. Sellers come into play, and sellers will become predominate after breakage of Neck level.

Formation Goal: Difference between HEAD and NECK is found, this difference is taken away from Neck level and formation goals are found.

Inverse Head and Shoulders Pattern:

Inverse head and shoulder pattern is total opposite of shoulder head shoulder pattern. It is in the upward trends, and it is showed in reversal trend. Prices make bottom, and create left shoulder. After that, an increase happens, and prices cannot increase more than a specific level. So, Neck level is occurred. After that, an another sale happens, and it intersects previous left shoulder, also one more bottom is made. And that occurs HEAD part. Finally, one more increase happens, and decrease movement up to left shoulder create RIGHT SHOULDER. Then rally begins, and prices intersect neck level. It’s a sign of reversal trend.