What is a head and shoulders bottom?

The Head and Shoulders Bottom, sometimes referred to as an Inverse Head and Shoulders, is a reversal pattern that shares many common characteristics with the Head and Shoulders Top, but relies more heavily on volume patterns for confirmation.

When is a head and shoulders bottom pattern complete?

Neckline Break: The Head and Shoulders Bottom pattern is not complete (and the downtrend is not reversed) until neckline resistance is broken. For a Head and Shoulders Bottom, this must occur in a convincing manner, with an expansion of volume.

How is the right shoulder formed?

The right shoulder is formed when prices move up again but remain below the central peak called the head and fall down nearly equal to the first valley between the left shoulder and the head or at least below the peak of the left shoulder. Volume is lesser in the right shoulder formation compared to the left shoulder and the head formation.

What is a head and shoulder formation?

Head and shoulders formations consist of a left shoulder, a head, and a right shoulder and a line drawn as the neckline. The left shoulder is formed at the end of an extensive move during which volume is noticeably high.