The Head and Shoulders pattern is considered one of the important patterns.

It belongs to the family of classical reversal patterns.

It usually appears at the end of an uptrend to reverse the movement

and change the direction of the trend. It may also appear at the end of a bullish correction wave

to end the correction and allow the price to continue in the downtrend.

The pattern is a bearish one, meaning it provides a selling opportunity.

Components:

The Head and Shoulders pattern consists of the following:
    • The left shoulder, which is the first peak that the price forms.
    • Then after a decline, the price rises again to form a new peak,
    • which is called the head and is the highest point in the pattern.
    • Then the price declines and rises again to form another peak,
    • which is the right shoulder, and it is lower than the head.

After the right shoulder is formed, the pattern is complete.

Neckline:

It is a support level that connects the lows formed between the peaks of the pattern,

or it may appear as a sloping horizontal level like a trendline.

How to trade the pattern:

Trading is done after the neckline is broken.

At this point, you can either enter a sell position immediately after the break,

or wait for a retest of the neckline and then enter a sell position.

How to set the target:

Measure the distance between the neckline and the head,

and take the same distance as the target for the trade.

Best areas for the pattern to appear:

The pattern is much stronger when it appears at a significant reversal area,
which increases the probability of a successful sell trade.

The best zones for the pattern to appear are supply zones,
followed by resistance areas or daily and weekly pivot levels.

At the end of the report:

Please do not rush into trading the pattern.
Choose only strong patterns that are supported by good selling zones,
to ensure a higher success rate for the trade along with proper risk management.

We wish you all successful trading.