The head and shoulders bottom, as the name suggests, is also a head and shoulders pattern, but this time the pattern is exactly the opposite of the head and shoulders top. In a downtrend, a trough is formed first (left shoulder), followed by a deeper trough (head), and then a higher trough (right shoulder).
As shown in the figure, you can see a typical head and shoulders bottom pattern. As the pattern forms, we can set a stop entry order above the neckline. The method we use to calculate the profit target is the same as the head and shoulders top pattern. First, we measure the vertical distance between the head and the neckline. This distance is almost equal to the possible increase in price after breaking through the neckline.
As shown in the figure, the price has a beautiful upward trend after breaking through the neckline. If the price reaches your profit target, you will be excited about it. However, here we also want to tell you some other transaction management skills, for example, you can lock in part of the profit after reaching the profit target, while continuing to hold part of the position in case the price may continue to move in the previous direction.
