- What is?
- What are the main features?
- How does the reversal confirmation of occur?
It is a graphical pattern or a reversal figure that signals the shift from a high to low trend. But how does pattern formation occur? Generally the SHS (Shoulder Head Shoulder) is formed by three consecutive tops that are separated from each other by two.
Image 1 - Head and shoulders formation
The tops 1 and 3 highlighted in the figure usually occur in the same price range and are the shoulders of the pattern. The top 2 is the tallest, is located between the shoulders and is known as the head of this reversal figure.
The two points in the bottom are formed in the same price range, where it is possible to draw a horizontal line or a diagonal line with a slight slope linking them. This line is known as the neck line. It works as a support and plays a key role in confirming the pattern.
What are the main features?
1 - Occurs within a bullish trend. This means that tops and bottoms precede the formation of the pattern. The head is the last rising top, that is, the highest point of the trend.
Image 2 - Head and shoulders projection
2 - Projectio…