How to read a Inverse Head and Shoulders
An inverse head and shoulders is a bottoming pattern. Price makes a low, a lower low, then a higher low, and the bounces between them line up into a ceiling called the neckline. On intraday charts it often shows up when a stock that sold off in the morning starts to turn.
What it looks like
The left shoulder is a dip and bounce inside a downtrend. The head is a deeper low that gets bought back up. The right shoulder is a shallower dip that holds above the head, which is the first real sign that sellers are running out.
Connect the two bounce highs and you have the neckline. Ideally volume picks up on the rally off the right shoulder.
How traders read it
The long entry is a break above the neckline. Some traders buy the break; others wait for price to pull back and hold the neckline as support before entering.
The stop usually goes under the right shoulder. For a target, measure from the bottom of the head up to the neckline and add that distance to the breakout.
When it fails
If the right shoulder undercuts the head, the pattern is gone. That's a new low, and the downtrend is still in charge.
Necklines that slope steeply downward are less reliable, and a break above the neckline on thin volume often fades. Bottoms take time, and the first attempt doesn't always stick.
Practice it
Open an example above and pause it at the head. Ask yourself whether you'd call a bottom there. Most people would be early. Then play it forward and see where the safer entry was.
Educational content only, not trading advice. Patterns describe what price did, not what it will do next.