Inverse head and shoulders
The inverse head and shoulders pattern, also known as inverted head and shoulders pattern, has three swing lows. The middle swing low is the lowest of all three. The line connecting the two swing highs of the pattern is called the neckline.
In the bullish instance, the left shoulder and the head forms the lower lows highlighting the existing downwards trend. The right shoulder, by ending above the head or forming a higher low, halts the bearish trend. The break above the neckline confirms a change of trend to bullish. Hence, the inverse head and shoulders pattern is a reversal chart pattern.
Look to buy on breakout above the neckline or on pullback of the neckline after the breakout. The volume should increase during the breakout. Stop loss can be placed below the low of the breakout candle or below the right shoulder.
For the target, measure the distance between the neckline and the head, then project this distance from the breakout point.
