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Topping Price Formation - Head and Shoulders Top

A head and shoulders includes three tops; left shoulder (LS), head and right shoulder (RS). The peak price of the head is the highest of the three tops.

Below is a head and shoulders top chart of weekly closes from Yahoo! Finance for Lennar (LEN).

The red line, a support level called the neckline, connects the bottoms of the left shoulder and the head. Notice the steep price downside after the neckline support is broken.

See Head and Shoulders Top Has Three Tops for another example of a head and shoulders top. See Bottoming Price Formation - Reverse Head and Shoulders for an example of a head and shouders bottom.

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