The pattern contains three successive troughs with the middle trough (head) being the deepest and the two outside troughs (shoulders) being shallower, the two shoulders is equal in height, the highs create a neckline (resistance level).
Step 1-Prior Trend: there s a prior downtrend.
Step 2-Left Shoulder: The left shoulder forms a trough in a downtrend, after that price increases. The high of the decline remains below trend line.
Step 3-Head: a decline begins from the high of the left shoulder to create the low point of the head, after that price goes up to make the second point of the neckline, the second point breaks the downtrend line.
Step 4-Right Shoulder: Price goes down from the high of the head (neckline) to make the right shoulder, the peak of the right shoulder is higher than the head and in the same line with the left shoulder, the advance from the low of the right shoulder breaks the neckline the pattern is complete.
Step 5-Neckline: The neckline connects the highs of the left and right shoulder. The slope of the neckline decide the pattern.
Step 6-Neckline Break: The neckline broken, the pattern is complete.
Step 7-Resistance Turned Support Resistance is broken, it turn into support.
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