Inverse Head And Shoulders

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Definition of 'Inverse Head And Shoulders'

The inverse head and shoulders is a technical analysis chart pattern that is the opposite of the head and shoulders pattern. It is considered a bullish reversal pattern, as it suggests that a downtrend is coming to an end and a new uptrend is about to begin.

The inverse head and shoulders pattern is made up of three peaks, with the middle peak being the highest. The first and third peaks are roughly the same height, and the second peak is lower than the first and third peaks. A neckline is drawn connecting the lows of the first and third peaks.

When the price breaks above the neckline, it is considered a signal that the downtrend is ending and a new uptrend is beginning. The target for the uptrend is typically equal to the distance from the neckline to the head of the pattern.

The inverse head and shoulders pattern is a relatively rare pattern, but it can be a powerful indicator of a bullish reversal. However, it is important to remember that technical analysis is not a perfect science, and there is no guarantee that the pattern will result in a profitable trade.

Here are some additional things to keep in mind when trading the inverse head and shoulders pattern:

* The pattern should be confirmed by at least two or three candles closing above the neckline.
* The volume should increase on the break above the neckline.
* The price should not close below the neckline after breaking above it.
* The pattern should occur in a trending market.

If these conditions are met, the inverse head and shoulders pattern can be a good entry signal for a long trade.

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