This is by far the most famous and popular charting pattern. This pattern consists of a left shoulder, head and a right shoulder.  The head and shoulders appears at the top of a trend and nowhere else.   Please click on the chart below for larger image     The build up of the left shoulder maybe accompanied by higher than normal volume, point A, then a retrace point B, this will normally be of low volume. Then you have a rally to point C, this is the head forming. This could be light volume, this passes point A (left shoulder) and then a retrace to point D. This decline goes lower than point A(left shoulder), at this stage you could get an idea of what's forming. The peak of point A should have held as support so alarms bells may start ringing at this point. Then you have a rally to point...

This pattern is similar to the rounded bottom, the only difference is once the rounded bottom is complete you then find the price retreats a little then goes sideways then goes up again. This creates the handle, the buy signal comes when the resistance is broken, the point where the peaks are joined together and formed the cup and handle.   Target   The target is taken from the bottom to the top which then is projected from the break out point.   Please click on the chart below for larger image      ...