Inverted Head and Shoulders Pattern

Stock Chart Patterns


Inverted Head and Shoulders

A reverse, or Inverted Head and Shoulders Pattern (often shortened to IH&S)
is a bullish stock market technical analysis charts reversal pattern that is found at market bottoms. A triple bottom is a variation of this.


Stock chart patterns recognition

As a variation of the Head and Shoulders pattern, the inverted Head and Shoulders is also one of the most reliable stock chart patterns found in technical analysis charts, but again it is important that volume confirms its validity. There are some occasions when an Inverted Head and Shoulders can be found as part of a continuation phase, but in these cases the pattern has usually not been confirmed by volume.

The left hand shoulder is created by a consolidation following a move produced with good volume levels. Volume should decrease on the consolidation before sellers push the market to new lows but with lower volume than the LH shoulder. This creates the head as prices rise back to near the previous consolidation level high.

The right hand shoulder is then formed on low volume when sellerss re-enter but fail to gain momentum producing a higher low and the markets then rise again on higher volume. The neckline should be broken on high volume to confirm the move.


Reverse Head and Shoulders Pattern - Stock Chart Patterns

Backtest

Price In a normal market will usually drop back to backtest the validity of the break up through the neckline of the Inverted Head and Shoulders. This move in prices should be on much lower volume but on rare occasions, it may not do a backtest if the markets momentum is very strong.


Volume Confirmation

  • LH Shoulder  - high volume
  • Head  -  declining volume
  • RH Shoulder -  low volume
  • Neckline  -  must be broken on high volume

Inverted Head and Shoulders Targets

A valid IH&S pattern produces a measured move so we can find a price target by calculating the vertical height of the Head, and then measuring an equal distance above the neckline.     


Stop Losses

A reverse head and shoulders pattern fails and is not valid if prices break back below the level of the RH Shoulder before hitting its price target. Stop losses can be placed just below this low.  


 

inverted head and shoulders pattern - stock chart reversal patterns

Example of an Inverted Head and Shoulders Chart Pattern

Head and Shoulders Pattern 

A Head and Shoulders pattern (often shortened to H&S) is a bearish stock chart technical analysis reversal pattern that is found at market tops.


head and shoulders inverted


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