how to trade the inverse head and shoulders chart pattern
trading the inverse head and shoulders pattern involves several key steps each with its own set of considerations below is a guideline on how to approach trading this chart pattern 3identification confirmation entry risk management profit target exit additional considerations an example of a inverse head and shoulders chart patternon a 15 minute chart spanning from july 19th at 11 15 to august 24th at 10 00 the invesco qqq trust series qqq showcased the inverse head and shoulders chart pattern following an 8 57 decline from a higher of 387 98 to a low of 354 76 the pattern s right shoulder was marked by lower highs at 365 94 and 3263 03 bottoming out at 360 68 the head was distinctly formed at a low of 354 70 subsequently the etf rallied to a high of 362 59 constituting the the top of the right shoulder which had a low point at 359 17 the critical neckline was delineated by lower highs of 354 76 and 354 70 on august 21st at 13 15 qqq broke above this neckline setting a bullish target of 370 66 this target was subsequently met with a rally on august 24th at 9 30 tradingviewthe significance of volume in the inverse head and shoulders chart pattern formationvolume plays a critical role in confirming the validity and strength of an inverse head and shoulders pattern during the formation of the left shoulder volume generally decreases as the left shoulder forms reflecting waning selling pressure for the head of the inverse head and shoulders chart pattern volume may spike at the low point of the head as panic selling ensues but it often picks up again during the subsequent rally indicating renewed buying interest for the right shoulder volume is usually lower compared to the head signaling that selling pressure is diminishing during the breakout of the neckline a significant increase in volume as the price breaks above the neckline is a strong confirmation signal it indicates that the market participants are in agreement about the asset s bullish prospects high volume during the breakout suggests that the upward trend is more likely to be sustained as it shows strong buyer commitment 4