Inverted head and shoulders are trend reversal chart patterns. In theory, the height of both shoulders should be the same, and the neck line should be horizontal. In practice, it often happens that the shoulders are not the same height, or that the neck line is ascending or descending (depending on the shape of the shoulders of the figure).
The first and third trough (approximately the same height) form the shoulders.
The second trough (at a height lower than that of the shoulders) forms the head.
There is no fixed rule but some authors consider that the height of the head should be 1.5 to 2 times that of the shoulders.
The neck line is determined by the two highest lows reached after the first shoulder and the head. These two low points are not always at the same level. The neck line can therefore be ascending, descending or more rarely, horizontal.
The inverted head and shoulders figure is definitively validated at the break of the neck line. The target price is equal to the height between the neck line and the top of the head, carried under the neck line.
Notes And Statistics: #
- In 98% of the cases, the output of the inverted head and shoulders pattern is bullish.
- In 74% of the cases, the price achieves the goal of the inverted head and shoulders pattern when the neck line is broken.
- In 97% of the cases, the bullish movement continues at the break of the neck line.
- In 52% of the cases, after exit, the course performs a support pullback on the neck line of the reversed head and shoulders pattern.