Inverse head and shoulders
An inverse head and shoulders pattern is a bullish reversal pattern which is the opposite of a head and shoulders pattern. It is formed when the price action of an asset forms the following:
- A short period of bearishness, followed by a short period of bullishness (shoulder 1).
- Another period of bearishness which extends below the initial period of bearishness, followed by a period of bullishness that extends up to the initial bullish high (head).
- Then a period of bearishness which extends either to the same level as, or slightly below/above the first period of bearishness, and then a period of bullishness which extends to the level of the bullish highs (shoulder 2)