SNE Head Shoulder Example

We have covered what the head and shoulder chart pattern looks like. Now lets see it play out. The following example is of Sony (SNE): LS = Left Shoulder, H – Head, RS – Right Shoulder.

The price target, which was the measurement from the head to the neckline, of about $4 played out perfectly. If we were playing this stock at the time, then we have waited for the stock to breakthrough the neckline after creating the peak of the right shoulder.

A break below the neck would either tell you that this stock is not a buy and stay away or you would short it using the $4 price target of $16. That neck than becomes a resistance.