Every trader aims to buy low and sell high, but only a few are able to muster the courage to go against the herd and purchase when the downtrend reverses direction.
When prices are falling, the sentiment is negative and fear is at extreme levels, but it’s at times like these that the inverse head and shoulders (IHS) pattern can appear.
The (IHS) pattern is similar in construction to the regular H&S top pattern, but the formation is inverted. On completion, the (IHS) pattern signals an end of the downtrend and the start of a new uptrend.
Inverse head and shoulders basics
The (IHS) pattern is a reversal setup that forms after a downtrend. It has a head, a left shoulder and a right shoulder that are upside down and placed below a neckline. A breakout and close above the neckline completes the setup, indicating that the downtrend has reversed.
As shown above, the asset is in a downtrend but after a significant decline, value buyers believe the price has reached attractive levels and will start