The Head & Shoulders is the best-known reversal pattern. A left shoulder peak, a higher head peak, then a lower right shoulder. When price breaks below the neckline (drawn through the two troughs), the bearish reversal is confirmed.
- Identify three peaks with the middle one highest — the pattern often takes weeks to form
- Draw the neckline through the two troughs between the peaks
- Wait for a close below the neckline on increased volume — don't front-run
- Measure the distance from head to neckline — project that distance downward for a price target
- Set a stop-loss above the right shoulder — if price reclaims it, the pattern has failed
- Large hand-counted samples (Bulkowski 2005) report that many patterns never reach their measured target; treat the target as an optimistic estimate and published success rates as rough guides
- Volume confirmation — falling volume into the right shoulder, rising volume on the break — is the classic filter (Edwards & Magee)
- Failure rate rises in strong trends — a clear H&S in a strong bull market often ends in a failed breakdown and continuation higher
- Tested by algorithm, the pattern carries some information but rarely a trading edge on its own after costs (Lo, Mamaysky & Wang 2000)
Left shoulder 108 (day 5), head 115 (day 14), right shoulder 109 (day 22), and both troughs between them at 100 — the neckline. The shoulders are within 1% of each other and the head clears both; day 26 closes at 99, below the neckline, which confirms it. Measured move: 100 − (115 − 100) = 85.
The example data
The turning points the daily closes run through, in straight lines between them; high and low are half a point either side of each bar.
| Day | Close |
|---|---|
| 0 | 95 |
| 5 | 108 |
| 9 | 100 |
| 14 | 115 |
| 18 | 100 |
| 22 | 109 |
| 26 | 99 |
| 30 | 92 |
- In real time the right shoulder is just a rally until the neckline breaks, and many necklines never break. The pattern is easiest to see afterwards.
- The measured move is a rule of thumb; prices often stop short of it, and a pullback to the neckline after the break is common.
- Studies differ: some find information in the pattern (Osler & Chang 1995 in currencies; Savin, Weller & Zvingelis 2007 in U.S. stocks), but not a rule to trade blindly.
def swings(s, n=3): # a swing high (low) is the extreme of the 2n+1 bars around it
w = s.rolling(2 * n + 1, center=True)
return s[s == w.max()], s[s == w.min()]
c = df['close']
highs, lows = swings(c)
ls, head, rs = highs.iloc[-3:] # left shoulder, head, right shoulder
between = lows[(lows.index > highs.index[-3]) & (lows.index < highs.index[-1])]
neck = between.mean() # neckline (flat here)
is_hs = head > max(ls, rs) and abs(ls - rs) / head < 0.05
target = neck - (head - neck) # measured move
confirmed = c.iloc[-1] < neckAssumes import numpy as np, import pandas as pd, and a DataFrame df with columns open, high, low and close for the data above.
- Technical Analysis of Stock Trends, R. D. Edwards & J. Magee, 1948 (later editions revised by W. H. C. Bassetti)
- Encyclopedia of Chart Patterns (2nd ed.), T. N. Bulkowski, Wiley, 2005 — success and failure rates from large counts of patterns
- G. Savin, P. Weller & J. Zvingelis, “The Predictive Power of ‘Head-and-Shoulders’ Price Patterns in the U.S. Stock Market”, Journal of Financial Econometrics 5(2), 2007
- C. L. Osler & P. H. K. Chang, “Head and Shoulders: Not Just a Flaky Pattern”, Federal Reserve Bank of New York Staff Report 4, 1995
Last reviewed October 2026 · How this site checks its content · Report a mistake
1. When is a head-and-shoulders top considered complete in classical charting?
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C. Before the neckline breaks, the shape is just three peaks — and many such shapes resolve upward.
2. How is the classic price target measured?
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B. The measured move is a rule of thumb, not a forecast with known accuracy.
3. What does research say about chart patterns like this one?
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A. Lo, Mamaysky & Wang (2000) found some patterns shifted return distributions slightly; profits after costs and out of sample are another matter.