Head and Shoulders
A formation of three peaks in which the middle peak is the highest and the outer two are roughly level, joined by a neckline through the intervening lows.
How it is identified
Neckline = line through the two lows between the peaks; conventional measured move = Head Height above Neckline, projected down from the break
Unit
qualitative
In depth
This is the most widely cited reversal formation in technical analysis and also the one most exposed to pattern-seeking, since three peaks of roughly similar height occur constantly in random series. Academic tests using rule-based definitions have generally found weak or cost-sensitive results, so the formation is best treated as a description of a shape rather than as evidence about the future. The measured-move convention is a rule of thumb with no theoretical basis. This dictionary records what practitioners mean by the term and does not suggest that identifying it tells anyone what price will do.
Worked example
Left shoulder ₹520, head ₹560, right shoulder ₹524, with a neckline at ₹490. The conventional measured move is 560 - 490 = ₹70 projected down from ₹490, giving ₹420 — a convention, not a forecast.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “Head and Shoulders” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.