July 16, 2025
4 mins read
I thought the inverse head and shoulders was a type of yoga pose for trading the first time I heard about it. As it turns out, it's just a chart trend that lets you know that the market might be about to turn around.
Take a look at this. That's your left shoulder when the price goes down. Then it goes down even more into the head, which is an even deeper dip. The ball finally bounces again, this time not as low as before—on the right shoulder. All of this is below a line that traders call the neckline.
For the downtrend to lose steam, the price may be able to push above that neckline, ideally with more buyers coming in. The buyers are taking the lead now that the sellers seem to have run out of gas.
As an example, say there is a stock that had fallen to 200 INR to 150 INR (left shoulder), then picked up a little to 170 INR, and further moves to 130 INR (head), again picks up but then falls again. It drops back down to 145 rupees (right shoulder), and this creates a neckline that is approximated at 170 rupees.
After the price breaks out with a high volume above 170, that is: (170 - 130) = 40; 170+40 = 210. The traders can go long, place a stop loss just below 145, and target 210.
₹170 retest would establish support upon which to rally next, and it would be a good entry point.
Moreover, in the case of RHIM, Market analysts put their chart with an expected target of 833 and a stop-loss of 790, which worked out well, and the stock continued to break out.
This illustration demonstrates that the inverse head and shoulders pattern, combined with the confirmation of the volume, a crossover of major moving averages, and momentum indicators, offers a safe, data-driven model through which to engage in bullish trading.
Additionally Read: What is Head and Shoulders Pattern
It's not as easy as circling three dips on a chart to find this pattern. There's a story behind it. Likely to appear after a real decline, where prices keep making lower highs and lower lows.
Putting the high numbers together between each of the three parts (shoulder, head, and shoulder) makes the neckline. If the price breaks above it, especially when there are a lot of trades, that's your first clue that something is changing.
Some traders like to start trading right away. Some traders would rather wait until the price touches the neckline again, this time as support, before they make a move. To compare, it's like putting your weight on a chair before sitting down.
Keep risk in check by putting stop-loss orders just below the right shoulder. And the business goal? How do you figure that out? Add the breakout point to the distance from the head to the collar. It's just numbers, but it gives you a goal.
Volume is very important here. Trades are more likely to go through with a move that has strong volume following a rise.
This pattern is more of a guide for me than a magic recipe every time I see it. But it gives you a sense of direction that feels useful. In trading, nothing takes away all the doubt. It's a little less stressful to make choices when you know the steps and the marks.
Clear plan points:
I like how the structure tells you where to enter, where to put your stop-loss, and how to figure out your goal without having to do a lot of complicated maths.
Shows a change in mood:
When a measure like the Nifty breaks out and stays above the neckline, it seems like the market is letting people know in a subtle way that the mood is changing.
High dependability:
As for earned trust, this is a pattern that many traders keep in their toolbox because it has worked for them in different situations.
Comfort from volume:
A breakout accompanied by steady buying volume often gives traders extra peace of mind before they make a move.
Well-balanced approach:
The neckline is both an entry signal and a support level, and the calculation of the goal is easy enough that you can plan your day around it without much trouble.
A quiet change in the mood of the market is the first thing that comes to mind when I see this trend. Even though it's not very big, there is a feeling that things are slowing down and that a new path might be just around the corner. Balance, timing, and changes in the number on the chart itself start to tell this story.
Change in the trend: This means that the market is moving from a downward phase to a more positive one.
Reverse pattern: It's important that the pattern fits well, so the shoulders should be close together and the collar should stay flat or only slightly slope.
Multiple timeframes: I've seen it on intraday, daily, and even monthly charts, though the longer timescales tend to feel more stable.
Volume rhythm: During the head's formation, volume often drops, but it rises quickly at the breakout, which is a sign that bigger players may be coming in.
Supply vs. demand: This graph shows how sellers are slowly losing ground while buyers take over.
Breakout Entry: Get in after a breakout by going long after the price closes above the collar with more volume.
Retest Entry: You should wait for a pullback to the level and then look for signs of support.
Stop-loss: Keep it right next to your right shoulder.
Profit goal: Add the distance from the head to the neckline to the price of the exit.
Splitting up your booking: To deal with volatility, take some gains along the way.
Extra support: Use indicators like RSI, MACD, or moving averages along with this for more confidence.
The inverse head and shoulders is a strong and well-known reversal pattern that forms despite being bullish. With clear entry and stop rules, target indicators, and volatility confirmation, along with dynamic volume and compatibility with additional indicators, it offers a disciplined trader a high-probability formation.
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An inverse head and shoulders pattern screener is a program that scans markets for stocks or assets building the bullish reversal pattern to alert traders of possible buy opportunities.
The target is determined by measuring the vertical distance between the head and the neckline and extrapolating that same distance above the breakout point.
Yes, it is a bullish reversal pattern and shows a probable changeover from a downtrend to an uptrend.
Research indicates the pattern has a success rate of about 75% to 83% if confirmed with volume and other indicators.
Double bottom and inverse head and shoulders are two of the highest-accuracy reversal patterns when correctly confirmed.
Some common patterns are:
Head and shoulders (and inverse)
Double top and double bottom
Cup and handle
Triangles (ascending, descending, symmetrical)
Flags and pennants
Rectangles
This trend applies to instruments including stocks, indices, forex pairs, commodities, and even cryptocurrencies, as well as practically any liquid asset.
The pattern is effective on all timeframes; however, more solid signals are found on daily and weekly charts, as there is less noise and more solid trend confirmation.
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