Inverse Head and Shoulders / Inverted Triple Bottom Formation
Reference values based on Bulkowski's "Encyclopedia of Chart Patterns". Data is primarily from U.S. markets and may differ for other markets.
A classic reversal pattern appearing at the bottom of a downtrend, composed of three troughs: the left shoulder, head, and right shoulder. The head is the deepest, with the shoulders at approximately equal depths. The pattern is completed when the neckline is broken to the upside, signaling a reversal into an uptrend. Known in traditional Japanese technical analysis as 'Gyaku Sanzon' (inverted three peaks).
Enter long when price clearly breaks above the neckline on a closing basis. For greater certainty, wait for a retest (pullback) to the neckline.
Project the vertical distance from the neckline to the head's low upward from the neckline breakout point. For example: neckline at 1025, head at 850, range of 175, target at 1200.
Place a stop-loss slightly below the right shoulder's low (1-3% below). After a neckline retest entry, it can be placed slightly below the neckline.
Ideally, volume decreases from left shoulder to head, then gradually increases from head to right shoulder. A volume surge at the neckline breakout is particularly important; breakouts without volume have low reliability.