Inverse Head and Shoulders

An inverse head and shoulders is the upside-down mirror of the classic top pattern. It forms three troughs at the bottom of a downtrend: a left shoulder, a deeper head, and a right shoulder roughly equal in height to the left. The peaks between the troughs form the neckline — a break ABOVE the neckline confirms the reversal. The story this pattern tells is that sellers are running out of conviction. The first shoulder is a normal continuation low in the downtrend. The head pushes to a new low, but the rebound is strong. The right shoulder fails to make a new low — meaning the sellers couldn't even retest the bottom. That's a crack in the bear case, and the neckline break is when the buyers take over. The measured move target is the distance from the head to the neckline, projected up from the breakout. A 250-pip head depth implies a 250-pip rally above the neckline.