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Head and Shoulders Formation

A Head and Shoulder formation can sometimes show the direction of a stock movement based on the direction of the formation.

A formation where the head is higher than the shoulders will form a resistance line with the tips of the shoulders. After the formation has been identified, and the price breaks through the resistance line, the stock will generally move lower.

A formation where the head is lower than the shoulders and the stock price breaks through the resistance line can indicate that the stock is about to move higher.