Often volume increases when the right shoulder appears, as astute investors realize this pattern is a positive for the market. This last move up forms the right shoulder. The third move down forms a higher low by turning back up before the price reaches the last low.

Once the lower low or head is in place the price rises again for a brief period before turning back down again.

This new trough creates the inverse head of the pattern. After a brief rise the price turns down again and forms a lower low. The left shoulder of an reverse head and shoulders pattern forms when a interim low has been made and the price rises. This is not be true, making the pattern more useful than many realize. Many technical investors assume the inverse head and shoulders stock pattern only occurs at the end of a long down trend. Reverse Head and Shoulders ExplainedĪ reverse head and shoulders can form within a longer term down trend, as a low after down trend, and during an up trend. It is the only definitive study of chart patterns that includes statistical analysis of the success and failure of over 50 chart patterns. Bulkowski who wrote Encyclopedia of Chart Patterns (Wiley Trading).

If you want to learn more on the reverse head and shoulders or many other technical chart patterns consider the book by Thomas N. When you look at the pattern it looks like an upside down head and shoulders formation. The important feature is the center trough is the lowest of the three. The trough on the left forms the left shoulder and the trough on the right forms the right shoulder. The reverse head and shoulders pattern is characterized by three troughs with the center one the lowest of the three. As one of the most popular stock chart patterns, the reverse head and shoulders is easy to recognize and widely used by technical analysts. Investors use the reverse head and shoulders pattern to identify trend reversals in a stock, ETF or index.

Reverse left and right headphones