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Finance Dictionary and Glossary of Investment Terms
head and shoulders
Definition 1.
A technical analysis term referring to a chart formation in which a price exhibits three successive rallies, the second one being the highest. The name derives from the fact that on a chart the first and third rallies look like shoulders and the second looks like a head. Believed by technical analysts to be a bearish indicator.
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Definition 2.
For technicians, a chart pattern indicating a peak, a decline, a second even higher peak, a decline, a rebound to the level of the first peak, and yet another decline. A head and shoulders pattern is supposed to be bad news, indicating the stock is headed downward.
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