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Thomas Bulkowski’s successful investment activities allowed him to retire at age 36. He is an internationally known author and trader with 30+ years of stock market experience and widely regarded as a leading expert on chart patterns. He may be reached at

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Bulkowski’s Head-and-Shoulders Tops

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Busted
Patterns
Candles Chart
Patterns
Event
Patterns
Small Patterns
Market
Industrials (^DJI):
Transports (^DJT):
Utilities (^DJU):
Nasdaq (^IXIC):
S&P500 (^GSPC):
As of 12/13/2018
24,597 70.11 0.3%
9,673 -161.07 -1.6%
760 6.01 0.8%
7,070 -27.98 -0.4%
2,651 -0.53 0.0%
YTD
-0.5%
-8.9%
5.0%
2.4%
-0.9%
Tom's Targets    Overview: 11/28/2018
25,350 or 23,650 by 12/15/2018
10,600 or 9,650 by 12/15/2018
765 or 730 by 12/15/2018
7,350 or 6,750 by 12/15/2018
2,750 or 2,580 by 12/15/2018

Written by and copyright © 2005-2018 by Thomas N. Bulkowski. All rights reserved. Disclaimer: You alone are responsible for your investment decisions. See Privacy/Disclaimer for more information. Some pattern names are the registered trademarks of their respective owners.

Statistics updated on 11/16/2018.

For more information on this pattern, read Encyclopedia of Chart Patterns Second EditionEncyclopedia of Chart Patterns 2nd Edition book., pictured on the right, pages 115 to 131.

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Head-and-shoulders top chart pattern
Head-and-Shoulders Top
 Score your pattern 

 

Important Bull Market Results for Head-and-Shoulders Tops

Overall performance rank (1 is best): Not available
Break even failure rate: 19%
Average decline: 16%
Pullback rate: 68%
Percentage meeting price target: 51%

The above numbers are based on more than 2,800 perfect trades. See the glossary for definitions.

Head-and-Shoulders Top Identification Guidelines

CharacteristicDiscussion
Price trendUpward leading to the pattern
ShapeLooks like a head perched atop two shoulders. A 3-peak pattern with the middle peak above the others. The pattern should look like a person’s head and shoulders, proportional, and not lopsided.
SymmetryThe two shoulders should peak near the same price, be nearly the same distance from the head, and look similar (both wide or both narrow peaks).
VolumeHighest on the left shoulder followed by the head. Trends downward 61% of the time.
NecklineJoins the two armpits.
ConfirmationThe pattern confirms as a valid one when price closes below an up-sloping neckline or below the right armpit when the neckline slopes downward.
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Head-and-Shoulders Top Trading Tips

Trading TacticExplanation
Measure ruleCompute the height from the head (A in the Measure Rule figure to the right) to the neckline directly below (B) then multiply it by the above "percentage meeting price target." Subtract the result from the breakout price (C). The breakout price is where price crosses an up-sloping neckline, or when the neckline slopes downward, use the right shoulder armpit.
Price reversalPrice must have something to reverse, so if the rise leading to the pattern is small, expect a small decline.
ConfirmationWait for confirmation before placing a trade.
TrendsA short-term rise leading to the pattern results in the best post breakout performance.
VelocityA high velocity rise leading to the pattern often results in a larger decline post breakout.
Yearly highPatterns within a third of the yearly high perform worst, but the differences are slight.
PullbacksPullbacks hurt post breakout performance.
Head-and-shoulders top chart pattern measure rule
The Measure Rule
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Head-and-Shoulders Top Example

Head-and-shoulders top chart pattern example

The above figure shows an example of a Head-and-shoulders top chart pattern. The left shoulder (LS) appears above the right shoulder (RS). But, the two shoulders appear symmetrical about the head. A neckline shown in blue, joins the two armpits. Where price closes below the neckline, a breakout occurs and it also confirms the chart pattern as being a valid head-and-shoulders top. A pullback occurs in this example just to make trading interesting.

-- Thomas Bulkowski

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Other Head-and-Shoulders Top Examples

See Also

Written by and copyright © 2005-2018 by Thomas N. Bulkowski. All rights reserved. Disclaimer: You alone are responsible for your investment decisions. See Privacy/Disclaimer for more information. Some pattern names are the registered trademarks of their respective owners. Does fuzzy logic tickle?