One of the best known figures within the patterns of trend change is the figure Shoulder Head Shoulder.
This pattern anticipates a trend change from bullish to bearish.
Or vice versa if it is an Inverted Shoulder Head Shoulder.
It is a pattern that usually has approximately 70% reliability, but remember that in trading nothing is exact or works 100%, so we can find faulty figures, this means that it has a high probability of happening, but it does not
it will necessarily happen.
We will see later, for now we will know the charting patterns that exist.
Structure of a Shoulder Head Shoulder
A Shoulder Head Shoulder is a market maximum, made up of three price peaks.
In which one is the head and the other two are the shoulders, it is formed like this:
The price goes up within the upward trend that it brought, until it reaches a maximum.
After the maximum the price drops slightly, forming the left shoulder.
The price rises again, reaching a new maximum, higher than the previous one.
Now it descends to a minimum similar to the previous one, that of the left shoulder.
Here the head is formed.
Then the price goes back up, to about left shoulder height.
Lower the price down to the low of the left shoulder and head, drawing the right shoulder.
The price is likely to continue to decline from here.
This pattern is confirmed when in the last shoulder formation, the price falls below the lows that had marked the shoulders and the head, what is normally known as the "neck line".
Considerations to take into account in each part of the figure:
Previous uptrend.
It is a bullish to bearish trend reversal figure, so the previous trend needs to be bullish.
Left shoulder.
It is a new high in which the price rises with volume also rising, and then reverses with falling volume.
So far it is all normal, we do not know if it is a shoulder head shoulder yet, or if it is going to form.
But take into account if the volume falls after the first maximum.
Head.
In this new price rise the volume is also rising, but it should be less than in the left shoulder.
Later in the fall, the volume also falls.
Here we already have indications that it may be a probable shoulder head shoulder, so it shows us the volume.
Right shoulder.
In this last rise, the volume is already very weak, being less than in the previous rises, and it increases considerably in the decrease in the price that forms the shoulder, therefore confirming the new downward trend.
Here the volume may be lower than the left shoulder or maintained at a similar height but should never exceed the head.
