An invented price line: three troughs after a fall, the middle one the deepest, and then a rise, outlined by a neckline over the two bounces between the troughs and the depth of the head below it.
An invented chart, drawn to show the shape of an inverse head and shoulders. Not market data.
Also searched ashead and shoulders bottom · reverse head and shoulders · inverted head and shoulders · neckline
How to recognise an inverse head and shoulders
- A fall comes first.
- Three troughs: a shallower one, a deeper one, a shallower one again.
- Two bounces between them that stop at about the same height. The line through their tops is the neckline.
- In the textbook sense it is complete only when the price closes above the neckline.
What it is taken to mean
It is read as a fall running out of sellers. The head makes a new low, but the right shoulder does not reach it, so the lower lows have stopped. A close above the neckline then ends the run of lower highs. Traders take that as a possible change from a down-trend to an up-trend.
That is a reading, and no more. A pattern is a description of what a price did, not a forecast of what it will do. Textbooks file this one under “reversal shapes”, which is a habit of naming and not a rule the market keeps.
How it is conventionally measured
The textbook measure is the depth of the head below the neckline, taken straight up from the point where the neckline broke. It is a way of describing how large the shape is. It is a convention and not a prediction.
What traders check
- Whether a real fall came before it.
- Whether the price has closed above the neckline or merely reached it.
- How long the shape took to form compared with the fall before it.
- What the price does if it comes back down to the neckline.
Where people go wrong
- Calling the bottom while the right shoulder is still forming.
- Seeing the shape in every three dips of a quiet range.
- Treating the textbook measure as a promise.
- Ignoring a larger down-trend on a longer time frame.
On a real chart
Textbook shapes are rare. A real chart is ambiguous: the peaks are uneven, the lines can be drawn two or three ways, and the same candles are an inverse head and shoulders to one reader and something else to another. Most shapes are also recognised only once they are finished, which is after the move they are said to announce has begun.
The picture on this page is invented. It was drawn by hand to show the shape as plainly as possible, with every awkward detail left out. It is not market data and it records nothing that happened.
Questions people ask
- Is an inverse head and shoulders bullish?
- It is classed as a bullish reversal shape: it is drawn at the end of a fall and completed by a rise through the neckline. That is a description of the drawing, not a statement about the future.
- How is it different from a head and shoulders?
- Only in direction. The ordinary shape has three peaks after a rise; the inverse has three troughs after a fall. Everything else is the mirror image.
- Does it predict a rise?
- No. It describes what a price did while the shape formed. Published studies of chart patterns disagree about whether they tell anything about the next move, and the tidy examples in textbooks were chosen afterwards, when the outcome was known. It is one observation to weigh with others.
The words on this page
An explanation for study. It is not advice, a recommendation or a forecast, and a pattern described here says nothing certain about what a price will do next.