What is Inverse Head And Shoulders Pattern?
Formation of the head and shoulders pattern in trendline indicates a reversal in uptrend. Similarly, an inverse head and shoulders pattern appearing in a downtrend is indicative of bearish to bullish reversal. Like head and shoulders pattern, the inverse head and shoulders also appear in all time frames and is easy to spot.
An inverse head and shoulders pattern forms when the price of an asset falls to a trough, then rises, falls for the second time, but this time the fall is steeper than the first. The price rises again and drops for the final time
Key Takeaways
The inverse head and shoulders formation is similar to head and shoulders formation, but only reverse
It shares many characteristics with head and shoulders – of three troughs with the first and second being shallower than the middle one
Inverse head and shoulders pattern appears in the downtrend
The formation signals a bull market and traders enter a long position once the formation is complete
Traders look for a steep price rise once the third rise breaks through the neckline
How To Read An Inverse Head And Shoulders Pattern
Inverse head and shoulders pattern indicates the end of bearish phase and onset of an uptrend. Traders enter a long position when the up breaks through the resistance line. They would look for a rise in volume to confirm the trend change. Inverse head and shoulders pattern appears frequently in the trendline, and since it shares many characteristics with the head and shoulder in an uptrend, it is also interpreted the same way.
Formation of the head and shoulders pattern in trendline indicates a reversal in uptrend. Similarly, an inverse head and shoulders pattern appearing in a downtrend is indicative of bearish to bullish reversal. Like head and shoulders pattern, the inverse head and shoulders also appear in all time frames and is easy to spot.
An inverse head and shoulders pattern forms when the price of an asset falls to a trough, then rises, falls for the second time, but this time the fall is steeper than the first. The price rises again and drops for the final time
Key Takeaways
The inverse head and shoulders formation is similar to head and shoulders formation, but only reverse
It shares many characteristics with head and shoulders – of three troughs with the first and second being shallower than the middle one
Inverse head and shoulders pattern appears in the downtrend
The formation signals a bull market and traders enter a long position once the formation is complete
Traders look for a steep price rise once the third rise breaks through the neckline
How To Read An Inverse Head And Shoulders Pattern
Inverse head and shoulders pattern indicates the end of bearish phase and onset of an uptrend. Traders enter a long position when the up breaks through the resistance line. They would look for a rise in volume to confirm the trend change. Inverse head and shoulders pattern appears frequently in the trendline, and since it shares many characteristics with the head and shoulder in an uptrend, it is also interpreted the same way.