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Head and Shoulders

Diagram 4.3.1. Head and Shoulders.


A Head and Shoulders pattern occurs when a peak (Head) is sandwiched between two lower peaks (Shoulders). In logical terms, the chart is telling us that the (stock) price did not have the strength to rise through either preceding highs. This is interpreted as weakness, and imminent decline in the price is likely by at least the amount of distance (A) between the neckline and the middle (Head) high.


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