A bullish reversal chart pattern with three troughs where the middle trough (head) is the lowest. The neckline break above confirms the reversal from a downtrend.
What Is an Inverse Head and Shoulders?
The inverse head and shoulders is the bullish mirror of the Head and Shoulders. It forms at the bottom of a Downtrend and consists of three troughs: the left shoulder, a deeper trough (the head), and the right shoulder at roughly the same depth as the left. The neckline connects the highs between the shoulders.
The pattern indicates that sellers made three attempts to push price lower, but the final attempt (right shoulder) failed to reach the head's depth, showing declining selling pressure.
Trading the Pattern
Confirmation occurs when price breaks above the neckline. On GBP/USD, enter long on the break with a stop below the right shoulder. The target equals the distance from the head to the neckline, projected upward from the breakout point.
A common entry strategy is to wait for the neckline Breakout, then enter on a pullback to the neckline (which often acts as new support). This pullback entry gives a better risk-reward ratio.
Reliability
The inverse head and shoulders is statistically one of the most reliable bullish reversal patterns. It works best when the right shoulder forms at a higher level than the left, showing increasing buying pressure. On daily and weekly charts, the pattern can take weeks or months to form, and the resulting reversal often leads to sustained new uptrends.
Related Terms
Head and Shoulders
A bearish reversal chart pattern with three peaks where the middle peak (head) is the highest and the two outer peaks (shoulders) are roughly equal. The neckline break confirms the reversal.
Double Bottom
A bullish reversal pattern where the price reaches the same low twice with a bounce in between, forming a "W" shape. The break above the middle peak confirms the reversal.
Triple Bottom
A bullish reversal pattern where the price tests the same support level three times, bouncing each time. The break above the resistance connecting the bounce highs confirms the pattern.
Support
A price level where buying interest is strong enough to prevent further decline. The price tends to bounce upward when it reaches support.
Breakout
When the price moves decisively above a resistance level or a chart pattern boundary, signaling potential continuation in the breakout direction with increased momentum.
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