Chart patterns
Neckline
Definition
The line that confirms a head and shoulders or a double top or bottom. In a top it runs through the lows between the peaks; in a bottom, through the highs between the troughs. The pattern is complete only when a candle closes beyond it.
Example
Say a stock forms a head and shoulders with peaks at $95, $102 and $96, and the pullback lows on either side of the head both sit near $88, so the neckline is flat at $88. A dip to $87.40 that closes at $88.30 leaves the pattern unfinished; only a candle closing below $88, say at $87.10, completes it.
Hypothetical numbers, for illustration only.
Also defined in
UpTickFlow is our product. These guides are education, not financial advice. Trading involves a substantial risk of loss.