The Head and Shoulders Pattern can sometimes be inverted. The inverted head and shoulders is typically seen in downtrends. What's noteworthy about the inverted head and shoulders is the volume aspect. The Following is a Typical Trend of an Inverted Head and Shoulders Pattern
- The inverted left shoulder should be accompanied by an increase in volume.
- The inverted head should be made on lighter volume.
- The rally from the head however, should show greater volume than the rally from the left shoulder.
- Ultimately, the inverted right shoulder should register the lightest volume of all.
- When the stock then rallies through the neckline, a big increase in volume should be seen.
New selling comes in and previous buyers get out. The pattern is complete when the market breaks the neckline. (Volume should increase on the breakout.)
HERE IS A SAMPLE CHART WITH AN INVERTED HEAD AND SHOULDERS FORMATION