Head and Shoulders Pattern – A Classic Distribution Signal

The Head and Shoulders pattern is one of the most reliable bearish reversal patterns in technical analysis—and it often signals a distribution phase before a downtrend.

Here’s how it forms:

Left Shoulder: Price rises, then pulls back.

Head: A higher peak forms, followed by another pullback.

Right Shoulder: A lower high forms, showing weakening buying pressure.

Neckline: A support line drawn connecting the two lows.

When the price breaks below the neckline with volume, it typically confirms that sellers are in control. This is the distribution phase, where smart money offloads positions as retail traders still expect upside.

Key characteristics:

Often found at the top of an uptrend.

Volume usually decreases across the pattern.

The projected drop is often equal to the height from the head to neckline.

Tip: Wait for confirmation with a strong candle close below the neckline before entering a short position.

Mastering this pattern can help you exit at the top—or even ride the trend down.

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