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Bullish Head and Shoulders Example!
In the case of a bullish Head and Shoulders reversal pattern, the official name changes to Inverse Head and Shoulders, meaning “the opposite”.
Allow us to clarify through an example!
The Inverse Head and Shoulders, is made up of three bottoms. The middle one is called the head, the bottom to the left is known as the left shoulder, and the bottom to the right resembles the right shoulder.
Additionally, there are two corrections in this case as well, that form the corresponding two tops.
The line connecting the two tops is called the neckline. A decisive breach of the neckline completes the Inverse Head and Shoulders pattern and opens the way for a new trend to the upside.
It’s basically like the bearish one but upside down!
So far so good, yes? Awesome!
Now, for a reversal pattern to exist, first there has to be an established trend. In this case, since we’re looking at a downtrend, we need a sequence of successive lower tops and lower bottoms.
Of course, some trends are longer than others, but as a minimum prerequisite for a downtrend to exist, at least two consecutive lower tops and lower bottoms are required and the price to drop below the second bottom.
Remember: If there’s no trend, there’s no reversal!
Now you know what an Inverse Head and Shoulders reversal pattern is!
