The accompanying volume pattern plays an important role in the development of the head and shoulders top as it does in all price
patterns. As a general rule, the second peak (the head) should take place on lighter volume than the left shoulder. This is not a requirement, but a strong tendency and an early warning of diminishing buying pressure. The most important volume signal takes place during the third peak (the right shoulder). Volume should be noticeably lighter than on the previous two peaks. Volume should then expand on the breaking of the neckline, decline during the return move, and then expand again once the return move is over.
As mentioned earlier, volume is less critical during the com­pletion of market tops. But, at some point, volume should begin to increase if the new downtrend is to be continued. Volume plays a much more decisive role at market bottoms, a subject to be dis­cussed shortly. Before doing so, however, let's discuss the measur­ing implications of the head and shoulders pattern.