The Inverse Head and Shoulders is the perfect chart pattern for traders who want to know when it’s time to buy. This bullish configuration signals that buyers are in control, so if you see one of these on your charts then prices may start going up soon. A lot of traders love to trade this pattern. In fact, the crash of Bitcoin in May was caused by Head and shoulder. So, these patterns work like the best crypto signals that can help you make profits from trading if you understand it right.
It has three stages; left shoulder, head, and right shoulder.
Left Shoulder: The left shoulder tells a different story. In fact, it’s an eager buyer stepping into the market to take advantage of all those who are selling their shares out because they’re not performing well enough or have lost faith in them altogether!
Head: The head has been pushed lower by the sellers but buyers are also stepping in to take control. This explains why there’s a stronger pullback attempt right now, which will likely test the previous swing high again before finding new grounds for an extended stay here.
Right Shoulder: The Right Shoulder is getting weaker as sellers are unable to push the price lower. However, buyers have continued with their stronger effort and testing of Resistance which was previously at an area high just before last week’s swing low in tandem-action between those two regions on either side struggling for dominance over each other while waiting out opportunity until it decides its time again: A new trend will start here!
If the price breakouts from Resistance and goes up, it’s clear that we’re in an Inverse Head and Shoulders pattern. If confirmed by highs around $5 or higher for BTC-USD (Bitcoin/US Dollar), then there could be some good times ahead!
Few Things To Keep In Mind
The importance of the duration when trading Inverse Head and Shoulders patterns cannot be overstated. The shorter a pattern’s lifespan, it will unlikely succeed against your desired direction for price movement; however, if you’re able to let these formations play out naturally then they can provide significant insight into what may happen next in an ongoing bull or bear market cycle!
So, only make trades when the market is showing a strong uptrend, the pattern is confirmed on a higher timeframe and there should be a minimum of 100 candles to form the pattern.
There are two different types of Inverse Head and Shoulders patterns. One with a long right shoulder, which means you should avoid trading breakouts here because it’s not worth your time or money to get into such situations where things may turn out badly for traders
In short: don’t trade all inverse head & shoulders.’ Read the pattern carefully and if it meets all the above-stated scenarios, make your call.
There’s a chance you miss the breakout for any reason. Sometimes it happens while you’re asleep and the market moved extremely fast and sometimes you’re just not present. But not all is lost. Whenever there is a breakout, there will be a retest of the previous level. Once you have confirmed a bounce from that level, you can enter the trade.