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2004issue C121-4

Head-and-shoulders neckline construction

A head-and-shoulders reading is assembled from three comparable swings, a neckline that joins the two highest lows bordering the head, and a closing breakout through that line.

  • At the end of an advance, the pattern is three successive rallies whose middle peak is the highest and whose outer peaks stay similar in height.
  • The neckline joins the two highest lows that border the head and functions as support until a closing breakout.
  • The reading is invalid if the shoulders exceed the head or if the neckline does not join those bordering lows.
  • After a confirmed close, the neckline is treated as resistance and the measured objective equals the head-to-neckline span projected from the break.
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Current trackHead and shoulders64 readings

Three comparable swings

At the end of an advance, the pattern is built from three successive rallies in which the middle peak is the highest and the first and last peaks are similar in height. That requirement is shoulder symmetry: the two outer peaks stay similar in height and remain inside the extreme set by the head.

Construction is described as taking several weeks to a few months. Same-session versions are treated as less dependable. A formation that does not sit at an extreme high is treated as carrying less technical weight.

Drawing the neckline

The neckline is drawn through the two highest lows on either side of the head and functions as support until a closing break.

A reading is invalid if the shoulders exceed the head or if the neckline does not join the two highest lows that border the head.

Closing breakout

Confirmation is a closing breakout: a session close through the neckline, not an intraday pierce. Heavy volume is treated as a supporting condition. A close at least 1% beyond the line is treated as additional help.

After a close through the neckline, that line is treated as resistance and the prior advance is treated as finished.

Measured objective

The implied objective equals the vertical span from the head to the neckline, projected from the neckline break in the reversal direction. That projection is the measured objective.

Inverse head-and-shoulders

An inverse head-and-shoulders is built from three successive declines with a lowest middle trough. Shoulder symmetry still requires the outer troughs to stay similar in height and inside the extreme set by the head.

After a close through the rising neckline, that line is treated as support and the same head-height projection is used.

Educational research material, not investment advice. Historical source context does not establish present-day performance.
25 of 37 in the Head and shoulders track
20051-2 pp.Next on Head and shouldersA familiar chart condition is a hypothesis, not a completed decisionRepresentativeness estimates an event's likelihood from how closely it resembles a familiar pattern, prior episode, or other resemblance, including useless noise.
All readings on this track · 37 readings
  1. 1982Head and shoulders as a three-path completion test
  2. 1984Stock low clusters as a cycle baseline
  3. 1985Four-phase construction of the head-and-shoulders reversal
  4. 1989Volume-confirmed reversal patterns, stops, and measured objectives
  5. 1991The journal as one checklist for taken and skipped trades
  6. 1991Head and shoulders as a direction hypothesis
  7. 1991Candlestick body and shadow construction with three-Buddha peaks
  8. 1992A three-count drill that binds candlesticks, head and shoulders, and entry rules
  9. 1997Constructing bump and run reversal channels
  10. 1998Testing reversal formations in bond futures
  11. 1999Construction first: extra shoulders, the neckline, and the diamond test
  12. 1999Dead-cat bounce, rollover, and failed reversals
  13. 1999Evaluating time gaps in bond reversal patterns
  14. 2000Constructing head and shoulders and double reversal patterns
  15. 2001Constructing broadening and complex bottoms
  16. 2001Constructing a slanted head-and-shoulders when the chart is tilted
  17. 2002Head and shoulders with dominant-cycle timing
  18. 2002Trendline breaks, right shoulders, and trailing stops
  19. 2003Confirmation tests for bearish top patterns
  20. 2003Commodity top hypotheses on a dollar rebound
  21. 2003A head-and-shoulders test during a bear rally
  22. 2004Pattern breakouts need a primary-trend filter
  23. 2004Reading candlestick closes on trendline and neckline tests
  24. 2004Candle diagnosis needs Western targets and stops
  25. 2004Head-and-shoulders neckline construction
  26. 2005A familiar chart condition is a hypothesis, not a completed decision
  27. 2005A 50-day ceiling and a rising-floor stalemate
  28. 2006A complete trading plan from philosophy to checklist
  29. 2006Thin-market head and shoulders with two averages and MACD confirmation
  30. 2010Head and shoulders as a playback-tested setup
  31. 2011Turning a head-and-shoulders outline into a breakout hypothesis
  32. 2011Volume-confirmed head and shoulders on AIG and Citigroup in 2007
  33. 2013Constructing head-and-shoulders milestone points
  34. 2013Head-and-shoulders geometry versus the filter stack
  35. 2013Algorithmic head-and-shoulders construction
  36. 2018International relative strength as a double-top case study
  37. 2019Structure invalidation before comfort-stops
By fieldChart patterns222 readingsBy year2004107 readings
All 64 readings tagged Head and shoulders
Also on Head and shoulders5 readings
1982Head and shoulders as a three-path completion test1984Stock low clusters as a cycle baseline1985Four-phase construction of the head-and-shoulders reversal1989Volume-confirmed reversal patterns, stops, and measured objectives1990Constructing continuation patterns from congestion geometry