What is a Head and Shoulder Pattern?

A Head and Shoulders pattern is when it has three sharp high/low points, created by three success rallies/reactions in the price. Thus creating a a chart pattern that looks like a human head with shoulders on each side of the head.

The key element of the pattern is the neckline. The neckline is formed by drawing a line connecting two low price points of the formation.

The neckline of a head and shoulder pattern can be horizontal or a slope up or down.

The pattern is complete when the support (neckline) is broken.

Do the Shoulders have to be Symmetrical?

The answer is no. The shoulders in the Head and Shoulder pattern may come in different widths, and sometimes shoulders can be rounded.

Is a Head and Shoulder Pattern Bearish or Bullish?

The classic Head and Shoulder pattern is a bearish signal. But an Inverted Head and Shoulder can be a bullish signal.

An Inverted Head and Shoulder is a possible indicator that a reversal of the current downtrend may convert into a new uptrend.

Like mentioned previously, an Inverted Head and Shoulders pattern is when it has three sharp low points, created by three success reactions in the price, followed by a strong uptrend to break the neckline.