Inverse head and shoulders
Also called: Inverse head and shoulders, Inverse H&S, Head and shoulders bottom, Reverse head and shoulders, Ters omuz baş omuz, TOBO
A three-trough pattern after a decline with the middle low deepest; a close above the neckline shows the downtrend's structure has broken.
4 min read · one puzzle on the page
What does an inverse head and shoulders tell you?
An inverse head and shoulders is a three-trough structure at the end of a decline. The left low is the left shoulder, the deeper middle low is the head, and the shallower right low is the right shoulder. The line through the peaks of the two bounces between them is the neckline. It mirrors the classic head and shoulders, which forms at the top of a rally.
What it shows is a downtrend coming apart. A healthy decline walks on lower highs and lower lows. After the head, the bounce clears the previous lower high, and the next pullback can't get back below the head. For the first time sellers can't even reach the old low.
Those two clues still don't complete the pattern. The turn is signalled by a close above the neckline. Until then you have a broken downtrend and an uptrend that hasn't been built yet. That gap is where impatience gets stopped out.
How do you spot it on a chart?
You need a clear decline first; a reversal pattern needs something to reverse. The left shoulder looks like an ordinary low in the trend. Say price bottoms at 1.0850 and bounces to 1.0920. Then it drops deeper, to 1.0780; that's the head. The bounce from the head reaches 1.0920 again, and this time it clears the previous high.
Then comes the right shoulder. Price pulls back but stops around 1.0845, 65 pips above the head. Shrinking candles and longer lower wicks at the low tell you selling is fading. Connect the two peaks to draw the neckline; here it's flat around 1.0920, though it can slope a little.
Confirmation is a candle closing above the neckline, not a wick poking through. After the break, price often comes back to the line, and if old resistance has turned into support it holds there with lower wicks. The head-to-neckline distance here is 140 pips; projecting it up from the break gives you a rough reference, not a promise.
The logical stop sits a little below the right shoulder. Buy the retest at 1.0925 with a stop at 1.0835 and you're risking 90 pips; that distance is your 1R. A stop under the head means a much wider risk and is usually further than needed.
Try it on a chart
There's no finished inverse head and shoulders on this chart; it shows the moment in the middle of one: the bounce after the decline cleared the previous high, and price is now turning down again, much like where a right shoulder starts to form. Check whether the sequence of lower highs is still intact and what structure you could rest a stop on right now.
Price fell, then corrected higher above the previous high; now it's trying to drop again. What do you do?
No sign-up needed. Take a guess; when the chart opens, you'll see why.
The most common mistake
Buying before the right shoulder exists. Once the bounce from the head clears the previous high, many traders call the turn and buy the first dip. But there's no right shoulder yet, only a broken downtrend. You don't know where the pullback will stop; it can go below the head too. Buy before a new higher low forms and there's no structure to rest your stop on.
Calling any three lows an inverse head and shoulders. If the right shoulder drops below the head, there's no pattern, just a continuing decline. If one shoulder took three candles and the other fifty, you're forcing the read.
Buying the top of the breakout candle. Enter on the close of the big green candle that clears the neckline and your stop under the right shoulder is a long way off. If you missed the break, waiting for a retest is calmer; if it never comes, there's no trade.
When doesn't it work?
When a strong downtrend is running on the higher timeframe, an inverse head and shoulders on the small chart is often just a bounce. Price breaks the neckline, rises a bit and turns back at the bigger trend's resistance. Check the 4-hour or daily first; if lower highs are still in place there, the pattern on the 5-minute promises a short rally at most.
A strong resistance right above the neckline can stall the break straight away. The target may look far on paper, but sellers waiting along the way cut the move short.
Watch the orders stacked above the line too. Because everyone knows the pattern, short sellers' stops and pending buy orders gather just above the neckline. Price wicking above it and closing back below is common; that's a sweep, not a break.
Frequently asked questions
Is an inverse head and shoulders bullish or bearish?
It's a bullish reversal pattern that forms at the end of a decline. The middle low is the deepest, the right shoulder stays above the head, and a close above the neckline means the downtrend's structure has broken. Before that close you only have a possibility. Its mirror, the classic head and shoulders, forms after a rally and points lower.
Where do you put the stop on an inverse head and shoulders?
On a long, the stop usually goes a little below the right shoulder. If price drops under it, the idea that sellers are exhausted is invalid. A stop below the head is much wider. If you entered on the retest, you can put it under the area that held at the neckline. Measure the distance as 1R and size the position to fit.
What is the difference between an inverse head and shoulders and a double bottom?
Both are bullish reversals after a decline. In a double bottom, price drops into the same area twice. An inverse head and shoulders has three lows with the middle one clearly deeper: sellers make one last new low but can't repeat it on the right shoulder. Confirmation is the same: a close above the line through the peaks between the lows.
