Series 7 Exam Question 234: Answer and Explanation

Question: 234

A head and shoulders bottom formation indicates

• A. the reversal of a bullish trend
• B. the reversal of a bearish trend
• C. that the stock is moving sideways
• D. that it might be a good time to sell short

Correct Answer: B

Explanation:

B. A head and shoulders bottom formation (inverted head and shoulders formation) is a bullish sign because it means that the stock hit a bottom and is starting to reverse. In other words, a head and shoulders bottom formation is a bullish sign because it's the reversal of a bearish trend.