How to Identify a Head and Shoulders Pattern on TradingViewBroadcom Inc.BATS:AVGOAlpacaTo effectively trade the head and shoulders pattern, there are a few factors to consider. If you don’t have an Alpaca account but have a TradingView account, you can sign up for an Alpaca account. Multiple Time Frame Analysis Analyze the chart on different time frames—such as 4-hour, daily, and weekly—to get a complete view of the broader trend. If the weekly chart indicates a downtrend while the 4-hour chart shows an uptrend, it may be premature or risky to interpret price action as a head and shoulders pattern. Aligning trends across time frames generally increases the reliability of your findings. In the image below, using Broadcom, Inc (AVGO) stock chart, the weekly chart shows a well-established uptrend, indicating bullish market sentiment. On the daily chart, an inverse head and shoulders pattern forms along the upward trend line. The 4-hour chart reveals another inverse head and shoulders setup on a smaller scale. Confirming this bullish structure across multiple time frames may increase a traders’ confidence in a continued uptrend, rather than relying on a single chart interval. NOTE: "AVGO" is used for demonstration purposes and should not be considered investment advice. Break of Swing High and Swing Low Pay attention to recent swing points to confirm the pattern. In a standard head and shoulders formation, a decisive break below the neckline (often aligning with a previous swing low) typically validates the pattern. Conversely, in an inverse head and shoulders, a break above the neckline confirms a bullish reversal. Observing retests of the neckline can further strengthen your confirmation and help refine entry or exit points. Use of Additional Technical Indicators Supplement your visual analysis with a few simple indicators to strengthen your signal confirmation and filter out false moves:Moving Averages (MA): Use simple or exponential moving averages (such as a 20-day EMA and a 50-day SMA) to gauge overall trend direction. A crossover where the short-term MA moves above the long-term MA supports an uptrend, and vice versa. Bollinger Bands: Look at Bollinger Bands to assess volatility and identify overbought or oversold conditions. If the price approaches or breaks out of these bands, it can signal a potential reversal or continuation, adding context to your swing points. Moving Average Convergence Divergence (MACD): Monitor the MACD to spot momentum shifts. If the MACD lines diverge from the price action, it might indicate that a breakout is less reliable. Attached is an image showing the head and shoulders pattern on AVGO stock with the MACD (12,26) displayed below. The MACD enhances the analysis by confirming momentum: a bullish crossover and expanding histogram support the pattern's validity, while divergence, such as flat or declining momentum despite rising prices, warns of a possible false breakout. TradingView Implementation: Coding the Head and Shoulders Pattern with Pine Script TradingView is a widely used platform that offers advanced charting tools and a scripting language called Pine Script. The head and shoulders pattern, being a powerful reversal indicator, can be detected automatically using a custom indicator with a Pine Script. Let's explore how to implement this using the example: Setting Up the Detection System The example Pine Script indicator below automatically highlights both traditional head and shoulders (bearish) and inverse head and shoulders (bullish) patterns on any chart. As shown in the screenshot, the indicator successfully detected inverse head and shoulders patterns on both 4-hour and daily timeframes, coinciding with an uptrend on the weekly chart. Understanding the Pine Script Code The script begins by declaring version 6 compatibility and creating an overlay indicator. The leftbars and rightbars parameters allow traders to adjust the sensitivity of the pattern detection—smaller values detect shorter-term patterns while larger values find longer-term formations. //@version=6indicator("Head & Shoulders", overlay=true)// Input parametersleftbars = input.int(4, title="Left Bars")rightbars = input.int(4, title="Right Bars") The core of the detection relies on identifying pivot points—local highs and lows that form the shoulders and head of the pattern. // Find pivot pointsph = ta.pivothigh(rightbars, leftbars)pl = ta.pivotlow(rightbars, leftbars) For the inverse head and shoulders (bullish pattern), the script checks if: The right shoulder low is higher than the head low (condi1) The head low is lower than the left shoulder low (condi2) When both conditions are met, a purple background highlights the pattern. // Bullish (Inverse) Head and Shoulders pattern detectioncondi1 = ta.valuewhen(na(pl) == false, pl, 0) > ta.valuewhen(na(pl[1]) == false, pl[1], 0) ? 1 : 0condi2 = ta.valuewhen(na(pl[1]) == false, pl[1], 0) < ta.valuewhen(na(pl[2]) == false, pl[2], 2) ? 1 : 0colorbull = condi1 == 1 and condi2 == 1 Similarly, for the traditional head and shoulders (bearish pattern), the script verifies if: The right shoulder high is lower than the head high (condi3) The head high is higher than the left shoulder high (condi4) When detected, a gold background highlights this bearish pattern. // Bearish Head and Shoulders pattern detectioncondi3 = ta.valuewhen(na(ph) == false, ph, 0) < ta.valuewhen(na(ph[1]) == false, ph[1], 0) ? 1 : 0condi4 = ta.valuewhen(na(ph[1]) == false, ph[1], 0) > ta.valuewhen(na(ph[2]) == false, ph[2], 2) ? 1 : 0colorbear = condi3 == 1 and condi4 == 1 Visual Indicators and Alerts The indicator uses distinct visual cues: Purple background (#7331FF) with an upward arrow (↗) for bullish patterns Gold background (#EBC003) with a downward arrow (↘) for bearish patterns These visual markers make it easy to spot patterns across multiple timeframes, as demonstrated in the screenshot where inverse head and shoulders patterns appear on both 4-hour and daily charts. // Background colors for pattern visualizationbgcolor(colorbull ? color.new(#7331FF, 50) : na, title="Bullish H&S", offset=-leftbars)bgcolor(colorbear ? color.new(#EBC003, 50) : na, title="Bearish H&S", offset=-leftbars)// Alert signalsplotchar(colorbull, title="Bullish H&S", char="↗", location=location.belowbar, color=color.new(#7331FF, 0))plotchar(colorbear, title="Bearish H&S", char="↘", location=location.abovebar, color=color.new(#EBC003, 0)) Setting Up Trading Alerts The script includes three alert conditions that can notify traders when: A bullish (inverse) head and shoulders forms A bearish head and shoulders forms Either pattern appears This allows traders to receive timely notifications without constant chart monitoring. As seen in the screenshot above, this indicator successfully highlighted multiple inverse head and shoulders patterns that aligned with a broader uptrend, demonstrating its effectiveness as a trend confirmation tool when used across multiple timeframes. // Alert conditionsalertcondition(colorbull, title="Bullish H&S Detected", message="Bullish Head and Shoulders Pattern Detected")alertcondition(colorbear, title="Bearish H&S Detected", message="Bearish Head and Shoulders Pattern Detected")alertcondition(colorbear or colorbull, title="H&S Signal", message="Head and Shoulders Pattern Detected") The head and shoulders pattern is a fundamental tool in technical analysis, offering insights into potential trend reversals. By understanding its structure, variations, and the context in which it appears, traders can make more informed decisions. While the pattern often provides valuable signals, it's essential to consider its limitations and corroborate findings with additional technical indicators and thorough analysis. Combining theoretical knowledge with practical application on platforms like TradingView and Alpaca can enhance one's trading strategy and execution. Disclosure Alpaca and TradingView are not affiliated and neither are responsible for the liabilities of the other. All investments involve risk, and the past performance of a security, or financial product does not guarantee future results or returns. There is no guarantee that any investment strategy will achieve its objectives. Please note that diversification does not ensure a profit, or protect against loss. There is always the potential of losing money when you invest in securities, or other financial products. Investors should consider their investment objectives and risks carefully before investing. 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Please note that this article is for general informational purposes only and is believed to be accurate as of the posting date, but may be subject to change. The examples above are for illustrative purposes only. All examples are for illustrative purposes only. Past hypothetical backtest results do not guarantee future returns, and actual results may vary from the analysis. The Paper Trading API is offered by AlpacaDB, Inc. and does not require real money or permit a user to transact in real securities in the market. 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