💥The inverted head and shoulders pattern is a chart pattern that signals a potential reversal of a downtrend. It is formed by three lows, with the middle low (the head) being lower than the other two (the shoulders). The pattern is complete when a neckline, which is a resistance level that connects the highs between the two shoulders, is broken.
💥The inverted head and shoulders pattern is the opposite of the regular head and shoulders pattern, which is a bearish pattern that signals a potential reversal of an uptrend. The inverted head and shoulders pattern is a bullish pattern that indicates that the price may start moving upwards after a period of decline.
💥Traders can use the inverted head and shoulders pattern to identify potential entry and exit points. Traders may look to enter a long position when the price breaks above the neckline, with a stop-loss order placed below the neckline to limit potential losses. The price target can be determined by measuring the distance between the head and the neckline, and then adding it to the breakout point.
💥As with other chart patterns, traders should use other technical indicators and analysis to confirm their trading decisions. The inverted head and shoulders pattern is not always reliable, and false breakouts can occur. Therefore, it's important to wait for confirmation before making trading decisions.
💥The head and shoulders pattern may sound familiar, as it shares the same name as a reversal pattern, but the meaning here is different. In the previous case, it was a reversal pattern, whereas now it is a continuation pattern. Looking at the picture above, it appears like the head and shoulders pattern in the case of an uptrend, only upside down, indicating a downward trend.
💥However, if the original trend is a downtrend, the occurrence of head and shoulders, with the appearance of the head and shoulders being normal (head and shoulders up, as shown in the picture above), is reversed in the case of a reversal head and shoulders pattern. Therefore, some people refer to the head and shoulders continuation pattern as an inverted head and shoulders pattern because it is upside down in the case of a reversal pattern.