Inverse Head and Shoulders: Rules and Target

What it shows

A coloured line through the seven swing points, a dotted neckline, a light fill, and labels for the Left Shoulder, Head and Right Shoulder. After the breakout a dotted target line runs to a Target label.

How Pravex works it out

1. First come the swings, taken from at most the last 600 candles. A high qualifies when it sits above the 5 highs to its left and no lower than the 5 highs to its right; a low qualifies the opposite way. The 5 candles on the right are why every swing arrives 5 candles after the fact. The list is then thinned so highs and lows take turns, keeping the more extreme point wherever two of a kind meet.
2. Take six alternating swings in a row: a high (where the lead-in leg starts), the left shoulder, a high, the head, a high and the right shoulder. The neckline is the line through the two highs around the head and may slope.
3. Head height is the head’s distance below the neckline. The head must be lower than both shoulders. Each shoulder must sit below the neckline but by no more than 95% of the head height, the shoulders may differ by no more than half the head height, and the two neckline highs may differ by no more than half the head height. The fall into the left shoulder, measured from the first high, needs at least the Lead-in strength share of the head’s depth, and that first high must be over the neckline.
4. Breakout: the first candle after the right shoulder that closes over the neckline. Target: the neckline’s price at the end of the pattern plus the head height. Failure level: the right shoulder’s low; a low under it before the break drops the shape.
5. The status starts as Awaiting at the breakout. It turns to Reached when price trades at the target, to Failed when price trades through the failure level first, and to Indefinable when a single candle covers both, since its high and low alone cannot say which came first.

Settings

Setting	Default	What changing it does
Which patterns to keep	All	Picks what stays visible. All is the full list. Awaiting and Reached keeps patterns that are live or hit their target. Only Awaiting keeps the live ones. Last Awaiting keeps just the most recent live one, so the chart shows one pattern at most.
Where targets are drawn	Only Awaiting	Chooses which statuses show a target line: All, Only Awaiting, Awaiting and Reached, or None. While a pattern is Awaiting its target keeps the pattern’s colour; after that it takes the colour of its status.
Lead-in strength	50	How strong the move into the left shoulder must be, as a percent of the head’s depth below the neckline. At 50 the leg from the first high down to the left shoulder must cover at least half of it. Raise it to demand a clearer downtrend first.
Show unconfirmed patterns	off	On adds patterns that have not broken out yet. Their final leg is dotted and ends at the highest high or lowest low since the last confirmed swing, so it changes with every new candle; the target shown is the one a breakout would give. Off keeps only patterns with a close through the breakout line.

How traders read it

The usual story is a downtrend running out of steam: a new low (the head), then a higher low (the right shoulder), and a close over the neckline as confirmation. The head depth projected up from the neckline is the usual target.

Using prices made up for the purpose, the head is at 80 and the neckline is flat at 100, so the head depth is 20. A candle closes over 100 and the target is 120.

When it misleads

The shoulder and neckline tolerances are fixed at half the head depth, so loose shapes may be skipped and tidy-looking ones that a purist would reject can pass. It fails most often when the neckline break is only a squeeze and price falls back under the right shoulder. A swing that is still forming never goes into a pattern, but finished patterns can still be revised. A later high above the last swing high (or low under the last swing low) replaces it and can drop the shape, and the newest candle’s close is not final until the candle ends.

Questions and answers

What makes it inverse?

Everything is mirrored: three lows instead of three highs, the middle low is the deepest, and the trigger is a close over the neckline, not under it.

Where is the inverse head and shoulders target?

One head depth above the neckline, taken at the end of the pattern where the last leg crosses it.

Why is my inverse head and shoulders not shown before the break?

Pravex draws a pattern only after a close over the neckline. Switch on Show unconfirmed patterns to see the ones still forming, with the last leg dotted.

What does Lead-in strength do?

It requires the fall into the left shoulder to cover a set share of the head’s depth, so the pattern follows a real downtrend and does not sit in a flat range.

Related: Head and Shoulders Chart Pattern, Double Bottom Chart Pattern, Triple Bottom Chart Pattern, All Chart Patterns, every indicator.