A reversal chart pattern with three peaks, where the middle (head) is higher than the outer two (shoulders). It signals that an uptrend may reverse into a downtrend. The “neckline” is drawn through the two troughs. A break below the neckline after the second shoulder confirms the pattern. Robots can automate detection of head-and-shoulders patterns and enter short trades on neckline break. (An inverse head-and-shoulders signals a bearish-to-bullish reversal).

Back to Robots Glossary Index