What is the head and shoulders pattern?

The "head and shoulders" pattern is one of the most popular and widely used technical indicators in financial markets. This pattern signals a possible trend reversal and consists of three main parts: the left shoulder, the head, and the right shoulder. The left and right shoulders have the same shape, while the head is located above them. When the price forms this pattern, traders often expect the current uptrend to change into a downtrend. It is important to note that for the pattern to be confirmed, the neckline, which connects the bottoms of both shoulders, must be broken. This signal helps predict a price drop and is used to make decisions about selling assets.