What the shape is
After a rise, three highs — but not level this time. The middle one stands clearly above the other two, and the outer two are roughly level with each other. The books call the middle the head and the outer two the shoulders.
In the illustrative history below, closes climb from ₹92 to a left shoulder at ₹118, fall to ₹106, run up to a head at ₹128, fall to ₹108, and make a right shoulder at ₹117 before easing to ₹108.
Read plainly, without the anatomy: buying carried price higher than it had been, then carried it higher still, then failed to reach the previous peak. That last clause is the whole of it. The shape is a record of one attempt that fell short.
The inverse head and shoulders is the same description after a decline — a low, a lower low, then a low that does not reach as far. Everything on this page applies to it upside down.
Three highs, the middle tallest, and a floor that slopes
The dashed line runs through the two troughs — ₹106 and ₹108 — so it rises across the chart rather than sitting level.
The two troughs are not at the same price, so the line through them slopes. That single fact is what this lesson is about.
Two honest necklines, two different days
Lakshmi's question is where the line goes, and there is more than one defensible answer.
Flat, at ₹106 — the lower trough. Simple, conservative, and it cannot be nudged.
Sloped, through ₹106 and ₹108 — the line the two troughs actually make. By the right shoulder it has risen to roughly ₹110, and it keeps rising.
Now take the final close of ₹104. Against the flat line it is a break. Against the sloped line the break happened one session earlier: at that point the line was about ₹109.20 and price closed at ₹108. That ₹108 close was still above the flat ₹106 line. Same chart, same prices, two different completion days.
Neither line is cheating. What would be cheating is choosing between them after seeing which one worked.
The highs give the shape its name. The line you draw underneath decides what it does.
Why this one is worth extra suspicion
Head and shoulders is the most recognised pattern in chart reading, and recognition is exactly the problem. A shape this famous gets found whether or not it is there.
Three things make it easier to see than to have. The head must be clearly above both shoulders, or you have a triple top from 07.02.02 with a wobble. The shoulders should be roughly comparable — but roughly is doing unspecified work, and a right shoulder at ₹117 against a left at ₹118 is fine while one at ₹124 is something else. And the pattern is only visible once the right shoulder has formed, which is to say after the thing it describes has already happened.
While it forms, you do not know you are in one. A head is only a head once a lower right shoulder exists; until then it is simply the highest point so far. That is not a flaw in your reading. It is a property of the pattern, and it is the reason 07.05.05 has a lesson about hindsight.
What the chart permits, and what needs another lesson
It permits you to say that after a rise, price made a high, a higher high, and then a high that fell short of it — and that a chosen line beneath has or has not been closed through.
It does not permit a target. Every book attaches one: measure the head to the neckline, project it down from the break. That convention, and what is honest about it, is 07.05.03 — not this page.
It does not permit a reliability claim either. The most reliable reversal pattern is a sentence you will read everywhere and will not read here, because it needs counting rather than repeating. 07.01.04 is where that is examined.
And it does not permit an entry, a stop, or a size. Those need a risk plan, which is Part 20 and Part 21, and no drawing on its own supplies one.