The Inverse Head and Shoulders (also called Head and Shoulders Bottom) is the mirror image of the standard H&S โ it signals the end of a downtrend and the beginning of an uptrend. It forms three troughs โ a left shoulder, a lower head, and a right shoulder โ with a neckline connecting the highs in between.
Pattern Diagram
Break above neckline confirms reversal โ target = head depth measured up from neckline
Trading the Inverse H&S
Entry Strategy:
Entry: Buy when price closes above the neckline on high volume
Stop Loss: Below the right shoulder low
Target: Neckline + (Neckline โ Head Low)
Conservative entry: Wait for neckline retest (price pulls back to neckline from above, then bounces)
Tighter stop just below the neckline โ Better risk-reward
Entry: Buy when price closes above the neckline on high volume
Stop Loss: Below the right shoulder low
Target: Neckline + (Neckline โ Head Low)
Conservative entry: Wait for neckline retest (price pulls back to neckline from above, then bounces)
Tighter stop just below the neckline โ Better risk-reward
Volume Pattern for Confirmation
- Left shoulder formation โ normal declining volume in downtrend
- Head formation โ volume may spike on the low (panic selling)
- Right shoulder โ lower volume than head (selling pressure fading)
- Neckline breakout โ must have high volume to be genuine
The Inverse H&S is the most reliable bottom pattern on NSE. NIFTY 50 formed a textbook Inverse H&S in late 2020 after the COVID crash โ the neckline breakout on massive volume launched one of India's biggest bull runs. Identifying this pattern early on weekly charts can capture significant upside.
