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Inverse Head and Shoulders Pattern

The inverse head and shoulder pattern have a left shoulder with the price that declines. This pattern is followed by a price bottom with an increase. The head is the price decline forming a lower bottom. The right shoulder price will increase and decline to form the right bottom. The neckline is called as level of support as trader use to determine at strategic area to place order. To place the neckline the first step we have to locate the left shoulder, head, and right shoulder on the chart. The standard head and shoulders pattern will connect the low after a left shoulder with the low created head. Also creates a neckline as the dark blue line on the charts.

Trading with Inverted Head and Shoulders

The trader will wait for the pattern to complete because a pattern doesn’t develop. A partially completed pattern is watched and trade is not made until the pattern break the neckline. In this pattern, we wait for price action to move low than the neckline after the peak of the right shoulder. Then we have to wait for price movement above the neckline. It occurs when the right shoulder is formed. Trade is initiated when the pattern is completed. Then plan the trade beforehand writes down the entry, stops, and profit target. It will note any variables that change your stop. The entry point is when a breakout occurs the neckline is broken and trade is taken. It requires more patience and comes with the possibility that move.

All this involves waiting for a pullback to the neckline after a breakout occurs. There is a conservative if the pullback stop and original breakout direction resume the trade if the price keeps moving in the breakout direction. Inverse head and shoulder chart pattern are also called ahead and shoulder bottom. It is the same as the standard head and shoulder pattern in inverted form. The pattern is identified when the price action of security has characteristics as the price falls to a trough and then rises. The price will fall below the former trough and again rises. Then price fall but not like the second trough. Here final trough is formed by price head upward towards the resistance. It is near the top of the previous trough. Investors will enter a long position when the price rises above the resistance of the neckline. The first and third trough is a shoulder. Then the second peak is formed ahead. A move above resistance called a neckline. This is used as a signal of a sharp move high.

Benefits

The first and third troughs are considered inverted shoulders. Then comes second regarded as the inverted head. Traders will identify the pattern as it will enter a bull position when the prices rise above the upper resistance level. Then it follows the right inverted shoulder. Once the stocker index moves above this level it indicates a sharp move higher. An increase in volume will confirm the breakout.

Attributes

Pattern type : It is Reversal

Indication :It is Bullish

Breakout Confirmation : The confirmation for this pattern is close and above the upper trend line with above-average volume.

Measuring :Here we take the distance between the first high and low of the head. Then added to the upper resistance level on the breakout.

Volume : The volume will increase and lead to the downward movement of the first shoulder. Then it drops off as the price rises. The volume is balanced during the formation of the head and increase as price break above the resistance level on the second shoulder.

Conclusion

The inverted head and shoulder chart pattern are familiar charts in technical analysis. It is best among many traders due to its strong and firm signal. We should cautious and wait for a confirmation as a breakout above the neckline before executing a bullish trade. It is recommended to get additional confirmation from some technical techniques. The pattern includes a comprehensive description and image to recognize chart pattern scenarios.