M4 · Part 2 — Tops & Bottoms (reversals) · Lesson 40/144
8 min 55 XP
Head & shoulders is the most reliable reversal pattern, because its shape *is* the story of buyers failing. A left shoulder (a peak), then a head (a higher peak — the trend’s last great push), then a right shoulder (a *lower* peak — buyers can no longer make a new high). Three peaks: high, higher, lower. The two dips between them define the neckline.
Why the right shoulder matters
The right shoulder failing to reach the head is the tell. In a healthy uptrend, each push makes a higher high. When the rally after the head stops short, momentum has died. But, as always, it is not confirmed until the neckline breaks.
Enter on the neckline break (or the retest of it from below), stop just above the neckline or the right shoulder, and target the distance from the head to the neckline, projected down from the break. Flip the whole thing upside down — a low, a lower low, a higher low — and you have an inverse head & shoulders, the same logic marking the end of a *downtrend*.