USD/JPY Inverse Head and Shoulders Pattern: A Bullish Reversal
The inverse head and shoulders (also known as the “head and shoulders bottom” or “reverse head and shoulders”) is a powerful chart pattern used in technical analysis. Here’s what you need to know:
Formation:
The inverse head and shoulders pattern forms at the end of a downtrend.
It consists of three successive troughs:
The first trough (the left shoulder) occurs after a downtrend, followed by a rally to a higher point.
The second trough (the head) is deeper than the left shoulder, signaling increased selling pressure.
The third trough (the right shoulder) occurs but doesn’t drop as low as the head.
These troughs create a pattern that resembles an inverted human head with shoulders.
Neckline:
A trendline connects the high points (or “peaks”) formed after the right shoulder and the head.
This trendline serves as a level of resistance that the price must break through to confirm the pattern.
Psychology Behind the Pattern:
The inverse head and shoulders pattern reflects changing sentiment among traders and investors:
Left Shoulder: Pessimism dominates as the price makes a low and then rallies slightly.
Head: Selling pressure intensifies, resulting in a
Formation:
The inverse head and shoulders pattern forms at the end of a downtrend.
It consists of three successive troughs:
The first trough (the left shoulder) occurs after a downtrend, followed by a rally to a higher point.
The second trough (the head) is deeper than the left shoulder, signaling increased selling pressure.
The third trough (the right shoulder) occurs but doesn’t drop as low as the head.
These troughs create a pattern that resembles an inverted human head with shoulders.
Neckline:
A trendline connects the high points (or “peaks”) formed after the right shoulder and the head.
This trendline serves as a level of resistance that the price must break through to confirm the pattern.
Psychology Behind the Pattern:
The inverse head and shoulders pattern reflects changing sentiment among traders and investors:
Left Shoulder: Pessimism dominates as the price makes a low and then rallies slightly.
Head: Selling pressure intensifies, resulting in a
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