Head and shoulders
The head and shoulder pattern or the regular head and shoulders pattern has 3 swing highs. The middle swing high is the highest of all three and the line connecting the two swing low of the pattern is the neckline. Head and shoulders is one of the most powerful patterns in trading.
In the bearish instance the left shoulder and the head form higher highs highlighting the existing upwards trend. The right shoulder by ending below the head or forming a lower high halts the bullish trend. The break below the neckline confirms a change of trend to bearish. Hence the head and shoulders pattern is a reversal chart pattern.
The volume should increase during the breakdown. Stop loss can be placed above the high of the breakdown candle or above the right shoulder. For the target, measure the distance between the neckline and the head. Then project this distance from the breakdown point.
