Head and Shoulders (Technical Formation)

The head and shoulders technical formation is characterized by the presence of a left shoulder, a head, a right shoulder, and a neckline drawn along the bottom of the pattern. This formation emerges as prices fluctuate, forming two smaller “shoulders” on either side of a larger “head” at the center. Head and shoulders formations typically signal an impending reversal in price. Conversely, an inverse head and shoulders formation signifies the opposite, often leading to a price surge.