A three-trough formation where the middle trough (head) is the lowest, while the side troughs (shoulders) are higher. This pattern signals a potential reversal from a downtrend to an uptrend. It forms after a prolonged bearish phase, and the breakout above the neckline resistance confirms the trend shift.
✳️ Formation Context
- Forms after a prolonged downtrend where selling momentum weakens gradually.
- Structure completes when the right shoulder forms and price breaks the neckline
- Typically seen during accumulation phases in oversold markets
🔷 Characteristics
- Left Shoulder creates a low followed by a short rally
- Head is a deeper low, lower than both shoulders
- Right Shoulder is a higher low, resembling the left shoulder
- Neckline connects the highs between shoulders and acts as key resistance
- Volume increases as price approaches and breaks the neckline
🌐 Market Condition
- Works best in stock markets, indices, and commodities after a sharp decline
- Suited for liquid instruments showing early signs of reversal from oversold levels
🎯 Trading Strategy
- Enter long position after a decisive breakout with confirmation from volume.
- Set stop-loss slightly below the lowest point of the right shoulder.
- Target is estimated by adding head-to-neckline height to the breakout level.