Head and Shoulders

A technical pattern or chart formation where a stock’s price rises to a peak and subsequently declines. Then, price rises above the former peak making a higher high and again declines. Price then rises again, but not as high as the second peak and declines once more. These three peaks with the middle being the highest and lower highs on either side of it, create a pattern in the image of a silhouette of a head and shoulders where the first and third peaks are the shoulders and the second peak forms the head. The pattern is considered a bearish type of reversal. See also Inverted Head and ShouldersA technical pattern or chart formation where a stock’s price falls to a trough and subsequently rallies. Then, price falls below the former trough making a lower low and once again rallies. Price then declines again, but not as low as the second trough and rallies once more. These three troughs with the middle being the lowest and higher lows on either side of it, create a pattern in the image of a silhouette of an upside down head and shoulders where the first and third troughs are the shoulders and the second trough forms the head. The pattern is considered a bullish type of reversal. See also, Head and Shoulders..