According to market technicians, it is time to sell stock in a head-and-shoulders formation when ________.
A) the price index pierces the left shoulder
B) the price index pierces the right shoulder
C) the price index pierces the head
D) none of these options takes place

Question

Quizplus · Accepted Answer

According to the head-and-shoulders formation, the neckline is drawn through the lows between the head and the shoulders. When the price pierces the neckline through the right shoulder, it confirms the pattern and indicates a potential downtrend. Therefore, it is the optimal time to sell the stock. A and C are incorrect because these events do not confirm the head-and-shoulders formation. D is incorrect because there must be a signal to sell according to the head-and-shoulders pattern.

According to Market Technicians, It Is Time to Sell Stock