Understanding the Head and Shoulders Pattern (OCO) in WLD Analysis

The Head and Shoulders pattern (OCO) is one of the most reliable bearish reversal signals in the crypto market. It typically appears after a prolonged uptrend and indicates a possible exhaustion of buyers.

How the Structure Works

The pattern consists of three distinct movements:

Left Shoulder: A moderate peak followed by a correction, forming a “valley”. The volume here is moderate, indicating that there is still buying interest.

Head: The price rises above the first peak with strength, but fails to sustain itself. This is the highest part of the entire structure, and after reaching the maximum, the price drops again.

Right Shoulder: An attempt at recovery, but it fails to surpass the head level. There is a drop in volume here - a clear sign of weakening buyers.

The Crucial Detail: The Neckline

The neck line connects the two valleys (low points) between the shoulders and the head. It can be horizontal or slanted. A break of this line with significant volume is the definitive trigger - when the price closes below it with strong volume, the pattern activates and a bearish movement approaches.

Calculating the Price Target

Measure the vertical distance from the head to the neck line. This same distance is then projected downward from the point where the breakout occurred. This is your estimated price target.

Why This Matters for Technical Traders

Experienced analysts focus on three points: clarity of the pattern ( well-defined formation ), volume as confirmation ( without strong volume on the breakout, the signal weakens ) and projections based on structures ( never guess prices, calculate them ).