Technical Analysis
Inverse Head & Shoulders
The bullish counterpart to head and shoulders — three troughs with the middle being the lowest, signalling a reversal from downtrend to uptrend.
Key rules
- Three troughs: left shoulder, head (deepest), right shoulder
- Neckline breakout on high volume confirms the pattern
- Right shoulder should be at a similar depth to the left shoulder
- Target = neckline + (neckline to head distance)
- Retest of neckline as support after breakout is common
The inverse head and shoulders is a bullish reversal pattern that forms at the bottom of a downtrend. It consists of three troughs: a left shoulder, a lower central trough (the head), and a right shoulder that is approximately equal in depth to the left shoulder.
**Structure** The pattern mirrors the bearish head and shoulders but inverted. The neckline connects the highs between the three troughs.
**Breakout** A close above the neckline on expanding volume confirms the pattern. This signals that buyers have taken control and the prior downtrend has reversed.
**Measured Move** The target is the distance from the head (lowest trough) to the neckline, added to the breakout point above the neckline.