Inverse Head and Shoulder

This pattern is identical to the H&S discussed above except it occurs at the end of a downward trend or market sell off. It is made up of the same four components only this time they are acting in reverse and thus give a Buy signal.



The Left Shoulder - The market looks to test lower price levels. Decreasing Volumes. Followed by test of Neckline.

The Head - Market again looks to test lower ground and succeeds with setting a higher price that was set by the Left Shoulder. Steady to slightly increasing Volumes. Followed by test of Neckline.



The Right Shoulder - Once again the market looks to test lower ground but this time fails to achieve the low price set by Head. Increasing Volumes. Again followed by test of the neckline only this time there is a good chance of the Neckline being violated and the market MAY look to test Higher ground.



The Neckline - Is a line that is drawn connecting consecutive Highs. It is a line where the price bounces off and refuses any Higher. It is basically the same as a Resistance Line.


Again most traders who are familiar with this pattern would try to Buy at the bottom of the head but it is a safer way to trade if you wait till confirmation that the Right Shoulder has formed and is looking to test the Neckline once again.