š¹ Definition:
The inverse head and shoulders pattern is a strong reversal pattern that appears after a downtrend, indicating a potential shift in trend from down to up.
š¹ How the pattern forms:
āŖļø Left Shoulder: Drop then rebound
āŖļø Head: Deeper drop than the shoulder then rebound
āŖļø Right Shoulder: Drop less than the head
āŖļø Breakthrough of the resistance level (neckline)
š¹ When is the signal correct?
ā When the candle closes above the neck line
ā It is preferable that the breakout is accompanied by an increase in trading volume
ā Additional confirmation from momentum indicators like RSI or EMA 200
š¹ Entering the trade:
š After confirming the breakout of the neck line with a clear close
š¹ Stop loss:
ā Below the right shoulder
š¹ Calculate the price target:
šÆ Measure the distance between the head bottom and the neck line, then add it to the breakout point
š¹ Common practical example:
This pattern appears frequently on highly liquid currencies such as
BTC ā ETH ā LINK
Especially on 4-hour and daily frames
š Educational note:
The clearer the neck line and the closer the shoulders are in time, the stronger the pattern.
š Follow us to learn other technical patterns with practical examples from the market.
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