INVERSE HEAD AND SHOULDERS
A trend reversal chart pattern that is seen following an uptrend or downtrend. The pattern is determined once the security’s price action meets the following characteristics:
- The price declines to a trough and then escalates
- The price plunges below the former trough and then increases again
- And the price drops again but not that far from the second trough
Upon reaching the final trough, the price moves upward toward the resistance close to the top of the past troughs. Normally, investors enter into a long position when the price climbs above the resistance of the neckline. The first and third trough are the shoulders while the second one is the head. Also called reverse head and shoulders or head and shoulders bottom.
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