What Is Head and Shoulders?
Head and shoulders is a classic bearish reversal pattern consisting of three peaks: a left shoulder, a higher head, and a right shoulder that's approximately equal in height to the left shoulder. The neckline connects the lows between the shoulders. The pattern signals that the uptrend is losing momentum and a reversal is likely.
How Head and Shoulders Works
The pattern develops over weeks to months: the left shoulder forms as a normal pullback in an uptrend, the head makes a higher high but with less conviction, and the right shoulder fails to reach the head's height — showing diminishing buying pressure. The pattern confirms when price breaks below the neckline. The measured move target is the distance from the head to the neckline, projected downward.
Why It Matters for Traders
Head and shoulders patterns in crypto carry strong predictive power on daily and weekly timeframes. The right shoulder forming with declining volume and bearish divergence on RSI makes the signal particularly reliable. An inverse head and shoulders (upside-down version) is an equally powerful bullish reversal pattern at market bottoms.
