The Inverse Head and Shoulders is the opposite of the Head and Shoulders pattern, appearing at the bottom of a downtrend and signaling a bullish reversal.
Pattern Details
Category
reversal
Success Rate
81%
Average Move
+22%
Duration
3-4 weeks
Pattern Structure
Pattern Structure
Key components that define this chart pattern
1
Left Shoulder: First trough, higher than the head
2
Head: Lowest trough, positioned in the center
3
Right Shoulder: Third trough, similar depth to left shoulder
4
Neckline: Connects the two peaks between troughs
Trading Rules
Trading Rules
Essential rules for trading this pattern successfully
✓
Enter long position when price breaks above neckline
✓
Volume should increase significantly on breakout
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Target = Distance from head to neckline
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Stop loss placed below right shoulder
Trading Tips
Look for RSI/MACD divergence
Volume increases at head and decreases at right shoulder
Pullback to neckline offers second entry opportunity