Reversal Chart Pattern: Inverted Head and Shoulders
The Inverted Head and Shoulders pattern is one of the trend reversal patterns that is also the opposite of the usual Head and Shoulders pattern. Usually this pattern is seen in downtrend, Since they are trend reversal pattern, this pattern requires there to be a previous trend.
Inverted Head and Shoulders is the opposite of Head and Shoulders and is formed in the downtrend when the lower low is followed by the lower high. The result is a series of three lowest or lower levels where the lowest level in the middle is the head, lower than the shoulders on either side. Like the Head and Shoulders pattern, both shoulders need not be the same size or height need not be the same, but the right shoulders should be higher than the lowest head.
Signal entries for Inverted Head and Shoulders patterns are similar to normal Head and Shoulders. With a line connecting the two valleys on both sides (right left of) the head (head) forms the neckline. If this line is pierced to the top then it completes the inverted head and shoulders pattern and enters the input signal to buy. Like the usual Head and Shoulders pattern, the neckline does not need to be horizontal, but the pattern is weaker if the neckline angle is pointing down (trend line) in the direction of the ascending trend. However in this pattern precedes entering the trading position when shoulder formation (second shoulder) is not recommended.
Inverted head and shoulders patterns are generally less reliable than regular head and shoulders patterns. Therefore, it is not advisable to precede the formation of this inverted head and shoulders pattern.
Like the usual head and shoulders pattern, the inverted head and shoulders pattern gives a measurable and clear price projection. This is measured by taking the distance or head height to the neckline and adding it from the neckline at the breakout level.