What is an inverse head and shoulders pattern?

An inverse head and shoulders (also called head and shoulders bottom) is a bullish reversal pattern that forms after a downtrend. It consists of three lows: a left shoulder (first low), a head (deeper low), and a right shoulder (higher low matching the left shoulder). A neckline connects the peaks between these lows. When price breaks above the neckline, it signals the downtrend is over and a new uptrend has begun.

How do you trade the inverse head and shoulders breakout?

Enter when price closes above the neckline on above-average volume. Stop loss below the right shoulder. Price target: measure the distance from the head (lowest point) to the neckline, and project that distance above the neckline. A head 20 points below the neckline gives a 20-point target above the breakout. Many traders also enter on a retest of the neckline as support after the initial breakout.

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Inverse Head and Shoulders: The Bullish Reversal You Need to Know

If you want to catch a stock at the bottom of a downtrend — not guess at bottoms, but have actual structural evidence the trend has reversed — the inverse head and shoulders is your pattern. Three lows that tell a story. A neckline that confirms it.

QUICK ANSWER

The inverse head and shoulders is the most structurally sound bottoming pattern because it requires three distinct seller failures at progressively higher lows — the head makes the lowest low, but both shoulders form higher, showing sellers losing strength with each attempt. The pattern confirms only on a close above the neckline with volume expansion. The measured move target (neckline plus head depth) is the minimum expected move and a useful first profit target.

What Is the Inverse Head and Shoulders?

The inverse head and shoulders (also called a head-and-shoulders bottom) is the mirror image of the classic bearish head-and-shoulders top. It forms after a downtrend and has three lows: a left shoulder (first low), a head (deeper low — the lowest point in the pattern), and a right shoulder (a higher low that roughly matches the left shoulder). A neckline connects the peaks between these lows.

The story: sellers drove the stock down hard (the head), but then buyers started fighting back harder each time — the right shoulder didn't go as deep as the head. When price breaks above the neckline, it means buyers have taken control of the tape.

THE FIVE PARTS

Left shoulder

First low. Stock drops, then bounces. Volume usually heavy here.

First trough recovery

Price rallies toward the neckline.

Head

Deeper low than the left shoulder. The maximum bearish pressure point.

Second trough recovery

Price rallies again, forming the right side of the neckline.

Right shoulder

A lower low than the head but ideally at a similar level to the left shoulder. Volume here should be lighter than the head — sellers losing force.

Volume Is the Key

The classic volume signature: the left shoulder and head form on heavy downside volume. The right shoulder forms on lighter volume — sellers are tired. The neckline breakout should come on the heaviest volume of the entire pattern. That volume surge is what separates a real reversal from a dead-cat bounce.

Neckline Retest: The Lower-Risk Entry

After the initial neckline break, many stocks pull back to retest the neckline from above — the former resistance becomes new support. This retest offers a cleaner, lower-risk entry than chasing the initial breakout candle. If the retest holds and bounces, you get a tighter stop and better risk-to-reward.

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Frequently Asked Questions

What is an inverse head and shoulders?

A bullish reversal pattern with three lows (left shoulder, head, right shoulder) and a neckline. Breaking above the neckline confirms the downtrend is over.

How do you trade the neckline break?

Buy the close above the neckline on high volume. Stop below the right shoulder. Target = head-to-neckline distance projected above the breakout.

Is the right shoulder supposed to match the left?

Roughly — it doesn't have to be exact. The key is that the right shoulder doesn't go as deep as the head, showing sellers are losing power.