Head and Shoulders distinguishes price geometry, the preceding trend and later confirmation. The top version is interpreted after a rise, the inverse after a decline. Swing selection and the breakout rule must be defined before testing.
StockCharts describes Head and Shoulders Top after a rise: a left shoulder, a higher head and a lower right shoulder. The shoulders are often similar, but exact symmetry of their height and width is not required. [1]
Head and Shoulders Bottom, also Inverse Head and Shoulders, reverses the geometry: the middle trough is deepest and both shoulders are higher. A preceding decline is part of the reversal interpretation. [2]
For the top version, the neckline connects two intermediate lows; for the inverse, two highs. It can be horizontal or sloped. The selected points and how the line is extended must be part of the test definition. [1] [2]
Completing the top version requires a downward neckline break, the inverse an upward break. Your test must distinguish a mere touch from trading beyond the line and specify whether it requires Close. A return to the line is not guaranteed. [1] [2]
StockCharts places more weight on increased volume during the inverse version's breakout than during the top version's. A price drawing without volume data therefore does not itself satisfy all conditions of this interpretation. [2]
With a horizontal neckline, subtract the head's distance above the line from the line's price; for the inverse version, add the head's distance below it. This measures a scenario, not a promise that the target will be reached. [1] [2]
A pivot confirmed by subsequent candles was not known at the moment of its extreme. TradingView warns that plotting a confirmed pivot in the past can mislead. A test must retain the actual time the information became available. [3]
Before testing, define the Timeframe, data source, swings, confirmation, entry, exit and costs including Slippage. Include failures and separate parameter selection from evaluation. A drawn target is not a record of an executed trade. [4]
A horizontal neckline and a target separate from price
For the clearest picture, read this entry together with Breakout, False Breakout, Trendline, Market Structure Analysis, Backtesting. The reverse links also lead from Double Top and Bottom.
01Must both shoulders be exactly the same?+
No. StockCharts allows different shoulder heights and widths. For a repeatable test, however, you must define the permitted deviation in advance instead of adapting it to a selected image.
02Is the measured target a price forecast?+
It is an approximate projection of the pattern's height. It does not guarantee reaching the price, a suitable entry or profit after costs; the actual path may invalidate the scenario.