Head and Shoulders

A Head and Shoulders is a chart pattern that suggests a stock's price is about to drop. It looks like three peaks: a smaller peak on the left (left shoulder), a taller peak in the middle (head), and another smaller peak on the right (right shoulder). You'll see this pattern on price charts when traders are watching for potential reversals—moments when an uptrend might flip into a downtrend. The pattern matters because many traders use it as a signal to sell before prices fall further. For example, if TechCorp's stock climbed to $50, dipped to $45, climbed higher to $60, dipped again to $45, then climbed to $52 before falling, that could form a Head and Shoulders pattern. It's not foolproof, but it's a popular tool in technical analysis.