•The Head and Shoulders pattern is a bearish reversal  that is found at the top of a trend and is comprised of three tops. 

 •The first top is the left shoulder and is usually formed on increasing volume.

 •The stock then pulls back to form a low and then thrusts higher than the first shoulder to form the head on lower volume.

•The stock then pulls back again to form another low before moving up for one final time to form the right shoulder.

 •The downside trigger occurs when the stock  pulls back and breaks the trend line drawn between the two lows, called the neckline.

Head and Shoulders Psychology

•The head which is a higher high is formed on diminished volume which shows a lack of conviction on the move.

•The stock then forms the right shoulder after the second reaction low and volume picks up as the stock breaks the neckline.

• The second reaction low between the Head and the right shoulder forms what amounts to a double bottom with the first reaction low between the first Shoulder and the Head.

•The stock moves down off of the right shoulder and breaks the neckline (double bottom). 

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