Head and shoulders

The head and shoulders is the most famous reversal pattern, built from three peaks: the middle one (the head) stands taller than the two beside it (the shoulders). The line through the lows between the peaks is again the neckline, and it may slope slightly. The story the structure tells is clear — the market tried to rise once more (the head), but the next attempt (the right shoulder) could not even reach it: the sequence of higher highs has broken from WITHIN.

Volume's typical path supports the story: strong on the left shoulder, weaker at the head, and noticeably thin on the right shoulder — level 4's "thinning crowd" picture embedded inside the pattern. The inverse head and shoulders mirrors the structure at the end of a downtrend; there, the traditional reading places special weight on volume reviving at the breakout.

The rule is the same as for double tops, and it is non-negotiable: a head and shoulders is incomplete until price closes beyond the neckline. While the right shoulder is forming, the structure is still open to both outcomes — if price recovers and prints a new high, the "H&S candidate" quietly dissolves into ordinary consolidation. An eye that scans charts looking for head-and-shoulders finds them everywhere; a disciplined eye looks at the neckline.