Head and Shoulders
One of the best-known reversal patterns in the head and shoulders. The concept in this pattern is that it tests resistance and, upon failing to break through successfully, price will then retreat in the opposite direction. The bottom of the three attempted breakouts is called the neckline, which serves as a form of interim support. After price moves below the neckline, the bearish formation of the head and shoulders is confirmed, and the price is likely to continue falling.
For example, in Figure 5.2, two examples of head and shoulders are revealed, both with clear neckline price levels and both followed by a price decline. The first of the two head and shoulders formations spans two months, and the second spans four months. ...
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