The neckline is a level of support or resistance found on a head and shoulders pattern that is used by traders to determine strategic areas to place orders. A neckline connects the swing lows (which occur following the first two peaks) of the head and shoulders topping pattern. A move below the neckline signals a breakout of the pattern and indicates that a reversal to the downside of the prior uptrend is underway.

In the case of a head and shoulders bottoming pattern, called an inverse head and shoulders, the neckline connects the two swing highs of the pattern and extends out to the right. When the price rises above the neckline it signals a breakout of the pattern and a reversal to the upside of the prior downtrend.