Head and shoulders pattern

This pattern is an extension of the the triple tops patterns, with the exception that the second peak is larger, reflecting a stronger push back of the longers to keep the trend going up. By the third peak, if it is lower than the peak prior, it is enough info for the longers to know they lost the war. They start to sell causing a breakdown price.

The fact that the second peak is higher that the two peak on each side creates a pattern resembling a head, with the two side peaks resembling the shoulders, there the name of the pattern.

Figure 4.11: Head and shoulders

Here is another example:

Figure 4.12: Head and shoulders

This same pattern above can happens in the opposite direction and it is called a reverse head and shoulders.

Figure 4.13: Reverse head and shoulders