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Inverse Head and Shoulder Pattern

Inverse Head and Shoulder Pattern

The Inverse Head and Shoulders is a bullish reversal chart pattern that often appears after a downtrend. It signals that the prior selling pressure is weakening and buyers are gradually taking control, preparing for an upward breakout.

Structure of the Pattern

Left Shoulder

  • Price declines, makes a low, and then rises slightly.
  • This forms the first trough of the pattern.

Head

  • Price falls again, creating a deeper low than the left shoulder.
  • This represents the strongest selling phase of the trend.
  • Afterwards, the price recovers again.

Right Shoulder

  • Price dips once more but forms a higher low compared to the head.
  • This shows sellers are losing strength and buyers are stepping in earlier.

Neckline

  • A resistance line drawn across the highs of the left shoulder and right shoulder.
  • A breakout above the neckline confirms the reversal.


How Traders Uses It

  • Entry Point → When price breaks above the neckline with volume confirmation.
  • Stop Loss → Usually placed below the right shoulder (or head for conservative traders).
  • Target Price → Measured by taking the vertical distance from the head to the neckline and projecting it upward from the breakout point.

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