Hi everyone,
Thanks for reading my idea. This, in MY opinion, is how we should consider if an inverse head and shoulders is valid or not.
What is an Inverse Head and Shoulders?
It is a downward trend reversal indicator that consists of a left shoulder, a head, and a right shoulder but inverted. I guest most of us already know how we draw the pattern. But I would like to emphasize the word REVERSAL. This is the keyword that most traders forget, including me.
How to know if it's valid or not?
As shown in the chart, you may already know what's valid or not. But just to put it into words, a valid inverse head and shoulders must be coming from a down trend.
As you can see on the Bitcoin chart on the left side, we can not say that it is an inverse head and shoulders IF the price action plays out like that. I'm not saying that the price action will not happen. It can but the pattern is invalid.
We can see that on the right side of the chart is the valid and correct way to spot an inverse head and shoulders . It must come from a downtrend, then form the pattern, and finally reverse to the upside.
I, myself, had made this mistake from the past. You can see it on my previous ideas but I would like to share it with you for you to not make this mistake.
I hope you learned something and let me know if you disagree. I'd be happy to learn more as well.
Cheers,
Juvs
Thanks for reading my idea. This, in MY opinion, is how we should consider if an inverse head and shoulders is valid or not.
What is an Inverse Head and Shoulders?
It is a downward trend reversal indicator that consists of a left shoulder, a head, and a right shoulder but inverted. I guest most of us already know how we draw the pattern. But I would like to emphasize the word REVERSAL. This is the keyword that most traders forget, including me.
How to know if it's valid or not?
As shown in the chart, you may already know what's valid or not. But just to put it into words, a valid inverse head and shoulders must be coming from a down trend.
As you can see on the Bitcoin chart on the left side, we can not say that it is an inverse head and shoulders IF the price action plays out like that. I'm not saying that the price action will not happen. It can but the pattern is invalid.
We can see that on the right side of the chart is the valid and correct way to spot an inverse head and shoulders . It must come from a downtrend, then form the pattern, and finally reverse to the upside.
I, myself, had made this mistake from the past. You can see it on my previous ideas but I would like to share it with you for you to not make this mistake.
I hope you learned something and let me know if you disagree. I'd be happy to learn more as well.
Cheers,
Juvs