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Neckline

The confirmation level of a head and shoulders, double top or double bottom, drawn through the swing points between the peaks or troughs.

Head and shoulders topThree peaks, the middle one highest, sitting on a flat neckline that price later falls through.pricetimeLeft shoulderHeadRight shoulderNecklineprice closes back through it
Head and shoulders. Three peaks in a row, the middle one highest, with the two dips between them joined by a line called the neckline. Traders watch for price to close back through that line. Turned upside down the same shape is the inverse head and shoulders.

The neckline turns a picture into a rule. Until price closes through it, the pattern is only potential; once it does, the pattern is considered complete and the measured-move target is taken from it.

Necklines are not always horizontal. A sloping neckline is common and changes the geometry, which is one reason different traders reading the same chart get different targets. Decide whether you measure from the break point or from the flattest version of the line, and be consistent.

Broken necklines frequently get retested, and that retest is the entry many traders prefer because the invalidation-level is right there. The trade-off is that in the strongest examples price never comes back and you miss the move entirely.

Related: head-and-shoulders, inverse-head-and-shoulders, double-top, measured-move, retest

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