A “Head and Shoulders” pattern describes the visual appearance of a stock or commodity price as it literally takes the shape of a head and shoulders. The characteristics are as follows:

1. The price rises to a peak and then declines.
2. The price then rises above the former peak only to fall again.
3. Finally, it rises a third time, but not to the height of the second peak, and then falls away once more.The first and third peaks create the ” shoulders”, and the second peak forms the “head”. Those who follow charts believe this shape is an indicator of what a stock’s price will do in the future – namely a reverse in trend.

I have been reading this stuff for a long time now in relation to the gold price. My personal view, having bought gold for the best part of 15 years, is that the money markets are desperate for the gold price to crash as a rising gold price indicates that people no longer believe in funny paper currencies. Guess what? I don’t believe in funny paper money currencies. Whenever gold falls in price I see that as a buying signal. I will only change my mind when governments stop printing money – anytime soon then eh?

Head And Shoulders Pattern

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