This formation comes after an up movement or an upward trend,the key feature of this pattern is a three well defined peaks ,the middle peak is higher than other two peaks, this middle peaks called a (Head) , the peak before the head called a (Left shoulder), the peak after the head called a (Right shoulder).
How this three well defined peaks formed ,the market is in an uptrend or up move and prices start to reverse down, this is the first peak or the (Left shoulder), then the market forming another upward rally that is higher than the left shoulder , penetrating previous resistance which is the top of the left shoulder , here prices have reached a new stage of prices above the previous peak ,then prices start to fall again forming the (Head), but this time this correction was heavy and prices correct back to approximately the starting point of the head ,then the prices moves up again forming the third peak, but this time it doesn't penetrated the previous peak '' the head '' , and the volume associated with the movement of price less than the volume associated with the formation of the left shoulder and the head is often a sign of the weakness of the buyer then prices start to fall again and again it is composed the (Right shoulder).
At the end, we have made up to now left shoulder and right shoulder and head, and we have to keep only one and last step, which is penetrating the line connecting the bottoms of this pattern which is called the neckline, once this happened the formation is completed and formation is activated for getting the target.
For the complex pattern of head and shoulders treat the more complex patterns as a simple head and shoulders , without forget the rules.
Calculating the price target, is the height of the shape , by calculating the vertical distance from the head to the neckline , and put this distance down from the stage of penetration down to reach the target price .