what is a head and shoulders pattern

A head and shoulders pattern is a classic chart formation in technical analysis. Signaling a potential trend reversal from bullish to bearish. It consists of three peaks: a higher peak (head) between two lower peaks (shoulders). With the neckline connecting the lows of the troughs between the peaks. The left shoulder forms as the price rises. Followed by a higher peak (the head), and then a lower peak (the right shoulder). Traders often wait for a break below the neckline to confirm the pattern, signaling a shift from bullish to bearish sentiment. This breakdown typically prompts traders to enter short positions. Understanding how to identify and interpret the head and shoulders pattern is crucial for traders to anticipate trend reversals and adjust their strategies accordingly for successful trading outcomes.