Mastering the Head & Shoulders Pattern with Metrax

The Head & Shoulders pattern is one of the most reliable reversal patterns in technical analysis. It signals a shift from bullish to bearish momentum and can help traders identify optimal entry and exit points.

What is a Head & Shoulders Pattern?

This pattern consists of three peaks:

• Left Shoulder: The first rally followed by a pullback
• Head: A higher peak (the “head”) followed by another pullback
• Right Shoulder: A third peak, similar in height to the left shoulder

When the price breaks below the neckline (the support level connecting the two troughs), it confirms the pattern and signals a bearish reversal.

Identifying the Pattern with Metrax

MX

BTC/USD

Bitcoin Spot

+2.4%

Using Metrax’s advanced charting interface, you can:

1. Draw trendlines to connect the shoulders and define the neckline
2. Set alerts when the price approaches the neckline
3. Measure the target by projecting the distance from the head to the neckline downward

Trading Strategy

Here’s a simple strategy to trade this pattern:

• Entry: When price breaks below the neckline with strong volume
• Stop Loss: Above the right shoulder
• Target: Measure the distance from the head to neckline, project it downward from the breakout point

Key Takeaways

The Head & Shoulders pattern is most reliable when:

• Volume decreases during the formation of the right shoulder
• The breakout below the neckline is accompanied by high volume
• The pattern forms after a prolonged uptrend

Ready to spot these patterns yourself? Open Metrax and start analyzing your favorite markets today.