Reversal Chart Patterns
Head-and-shoulders, double and triple tops and bottoms — the patterns that signal an existing trend is ending.
The head-and-shoulders pattern gets the book's most extended treatment among reversal patterns, and Murphy walks through it as three consecutive peaks — a left shoulder, a higher head, and a right shoulder roughly matching the left shoulder's height — connected along the two intervening troughs by a "neckline." The pattern is only considered complete, and only then treated as an actionable sell signal, once price closes decisively below that neckline; before that confirmation, what looks like a forming head-and-shoulders is still just three peaks that could resolve any number of other ways.
Double and triple tops and bottoms are covered as simpler variants of the same underlying logic: price tests a level, fails to break through, pulls back, then tests the same level again and fails a second (or third) time — each failed attempt weakening the conviction of the side that keeps failing and strengthening the case for a reversal once the opposite boundary (the low between the two tops, or the high between the two bottoms) is decisively broken.
The measured move is the height from the head down to the neckline, projected the same distance below the neckline after the break — presented in the book as a rough guide, not a guarantee, since actual follow-through varies considerably.
Murphy is emphatic that the shape alone is not sufficient — volume behavior across the pattern is treated as equally important confirmation. In a textbook head-and-shoulders top, volume is typically heaviest on the left shoulder, lighter on the head even though price reaches a new high there, and lighter still on the right shoulder — a declining-volume pattern into new price highs that itself signals weakening conviction behind the advance, independent of the shape. A "head-and-shoulders" shape with volume expanding into the head and right shoulder is a much less reliable reversal signal than the textbook declining-volume version, which is why the book treats volume as inseparable from pattern reading rather than a separate, optional check.
- A head-and-shoulders pattern is only confirmed on a decisive neckline break, not when the third peak simply appears.
- Double and triple tops/bottoms are the same underlying logic as head-and-shoulders — repeated failed attempts at a level weaken that side's conviction.
- The measured-move target projects the pattern's height from the breakout point, treated as a rough guide rather than a guarantee.
- Volume should decline into the final peak(s) of a textbook top — rising volume into the pattern undermines the reversal signal even if the shape looks right.