An inversed head and shoulder formation is a rebound formation that is formed in a downtrend. An inversed head and shoulder formation consists of a left shoulder, a head and right shoulder formed upside down.
The head in a inverse head and shoulder formation, the middle bottom, is lower than both the left shoulder and the right shoulder. There must be an increasing volume during the formation of an inversed head and shoulder pattern. A horizontal trend line are drawn from the peak levels in an inverse head and shoulder formation.
The price target for an inverse head and shoulder formation is the distance between the horizontal trend line and the bottom level of the head counting upward from the horizontal trend line. A buy signal for an inverse head and shoulder formation is given when the horizontal trend line is crossed with increasing volume.
