A Head & Shoulders pattern describes a chart formation where the stock rises, declines, rises again higher than point A (C), declines (D), and finally rises to about the same height as A (E) before falling again (F). See picture below from our live trading room for more clarification. A and E are "shoulders", and C is the head.
B and D make up what's considered the "neckline." After F, the stock will typically return to the "neckline", but will not surpass it.
For those involved in a trading system such as a stock trading system, options trading system, or futures trading system, this pattern is regarded as one of the most reliable patterns
Related terms: descending triangle pattern, ascending triangle pattern, symmetrical triangle pattern, rouding top pattern, rounding bottom pattern, and broadening pattern.