Series 65: Bearish Patterns

Bearish Patterns

Head and shoulders—pattern will show a small peak (shoulder), followed by a large peak (head), followed by a small peak again (shoulder). When the second and most recent peak occurs, this signals that the price is about to drop rapidly and, hence, that it would be a good time to sell. After the completion of the head and shoulder pattern, the stock is expected to move through its support and continue to fall. A head and shoulders pattern predicts a downward trend in the stock.

Double top—price formation resembling a peak then a valley then another peak at the same price as the first peak. The valley price is said to be the “neckline,” and after the second peak, if