What is inverted head and shoulder pattern?
✍The head and shoulders pattern can sometimes be inverted. The inverted head and shoulder pattern is typically seen in the end of downtrends.
✍In an downtrend bears starts showing signs of weakness and the reversal happens.
✍The inverted head and shoulder pattern consists of left and right shoulder with middle head in it. The second shoulder is normally small in size as compared to first one.
✍The trend reversal pattern itself says the there should be predefined trend before the pattern forms. If the pattern forms without any predefined trend then the reliability is less.
✍The inverted head and shoulder pattern is based on simply "higher tops, higher bottoms" & " lower tops, lower bottoms".
✍The higher low formation puts an end to downtrend and bulls starts dominating the price.
How the inverted head and shoulder forms?
Shoulder 1 - The first shoulder is the part of downtrend and the pullback happens after it.
Head - The inverted head is the largest in the size compared to all three. The low the head is bottom of the stock and the end of downtrend.
Shoulder 2 - The second shoulder formation is the higher low compared to head. It can face resistance at the neckline.
How to trade inverted head and shoulder?
✍The inverted head and shoulder pattern should be trade at the bullish or long side trade.
✍The confirmation of the pattern takes place with the breakout of neckline with the large volumes and delivery percentage.
✍The little consolidation before the breakout makes the pattern more clearer and reliable.
✍The stoploss of the trade is the low of second shoulder and the target is double the size of head.
✍If the small pullback takes place after the breakout neckline may act as a support level for price. In such case the stoploss should be shifted at the neckline.
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