Head and shoulders
A head and shoulders pattern lines up three peaks, the middle one highest. A break below the neckline signals a possible bearish reversal.
It appears after a rally: a peak (left shoulder), a higher peak (head), then a lower peak (right shoulder). The neckline connects the two intermediate troughs. The pattern is only confirmed on a close below that line.
The theoretical target is found by projecting the height between the head and the neckline from the breakout point. A return to the neckline from below (pullback) often offers a second entry.
Its inverse version, at the bottom of a decline, is a bullish reversal pattern. Without a neckline break, it is just a range with three peaks.
See also