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Head and Shoulders Definition:
A pattern is also a trend reversal formation.
It is formed by a peak (left shoulder), followed by a higher peak (head), and then another lower peak (right shoulder).
A “Neckline” is drawn by connecting the lowest points of the two troughs. Neckline support does not need to be strictly horizontal.
. This illustrates that the upward trend is coming to an end.
. When a formation is seen in an uptrend, it signifies a major reversal.
. The pattern is confirmed once the price breaches the neckline support
In this example, we can easily see the pattern.
How to Trade the Pattern:
we put an entry order below the neckline.
We can also calculate a target by measuring the highest point of the head to the neckline.
This distance is approximately how far the price will move after it breaks the neckline.
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