Head and Shoulders is a popular reversal pattern among traders. It comprises three peaks at the end of an uptrend, with the third peak lower than the second, referred to as the left shoulder, head, and right shoulder. The key feature is that the right shoulder indicates a change in market structure. Traders should look for a right shoulder retracement to the 618 Fib level, RSI Bear Div from the left shoulder to the head to increase the probability of success, and volume on breakout of the right shoulder. The right shoulder should not take an extended period to form. Traders can enter aggressively at the peak of the right shoulder or conservatively at a BCR of the neckline. Stop placement for the two entries is either above the head if aggressive or above the right shoulder for the conservative entry.
