If you have a dandruff problem, we’re not here to judge...but if we’re referring to the finance term, we’re talking about the technical trading pattern that resembles a head and two shoulders.
Technical analysis geeks (and individual investors) use this method to to determine a stock’s upward or downward trend, thereby allowing them to reap the most profitable return.
And who doesn’t want to earn lot of moolah? In a head and shoulders top formation, the stock reaches a plateau (think: left shoulder), then goes higher (the top of the head), and then drops back to the plateau again (the right shoulder).
Think of it as a classic roller coaster. You know the kind where you slowly creep to the top, teetering above the trees before you squeamishly plummet to the ground, only to head back to an immediate summit, followed by the same gut-wrenching drop and ascension. Yeah it’s like that, only on this technical ride, the equity analysis is worth dealing with the market-jitter-induced vomit in your lap, and it’s a company's stock that is increasing in value over a specific period = more potential moolah for yoolah.
However, the completion of this roller coaster pattern, er...head and shoulders, is commonly considered an indicator of a rising stock reversal. That would be a drop, or an indication that a rising stock may be reversing its course = less potential moolah for yoolah.
Intrigued? Do your homework and hang with the tech geeks for a while. They could teach you a thing or two...just not how to prevent dandruff.