According to the bibliography, one of the most reliable reversal patterns in technical analysis is the Head and Shoulders.
It is based purely on price action, and this is where its reliability stems from.
But let’s go ahead and apply it on a price chart so we witness its value.
The formation of a Heads and Shoulders reversal at the top of the uptrend on the EURUSD daily timeframe signaled the end of the upward direction and the early beginning of a new trend in the opposite direction.
And to be more precise, than was signalled when prices violated successfully the corresponding neckline.
I hope this is clear.
One more example before I let you go.
This time on the Dow Jones Industrial Average on the Daily timeframe.
After a decline in prices, the presence of a double bottom on the price chart and the breach of the current Top-level signals the beginning of a new trend to the upside.