INVERTED HEAD AND SHOULDERS AS A REVERSAL PATTERN IN A DOWNTREND (BULLISH)

The inverted head and shoulders signaled a bottom.  While the left shoulder actually dipped a bit lower than the head, everything else appears to be 'text-book' in its formation.  Diminished volume on the bottoms and an increase in volume on the breaking of the neckline.  (In fact, you'll notice that the market gapped above it!)

INVERTED HEAD AND SHOULDERS AS A REVERSAL PATTERN IN DOWNTREND (BULLISH)

(Charting software by Gecko-Charts 2000.)

Can you see the inverted head and shoulders in the downtrend. A clear bullish foreshadowing as to what was to come. Notice how the market breaks out through the neckline (it actually gaps above it), ... comes back to re-test it and then powers back up.

INVERTED HEAD AND SHOULDERS AS A REVERSAL PATTERN IN A MINOR DOWNTREND (BULLISH)

This inverted head and shoulders pattern reversed a minor downturn.  And while the right shoulder's decline exceeded the left shoulder's, the pattern effectively ended the downtrend.  Volume declined on the bottoms and picked up on the breaking of the neckline.  (Note the gap on the breakout!)  (This market ultimately climbed to over 67 cents by the end of March.)

INVERTED HEAD AND SHOULDERS AS A REVERSAL PATTERN IN A MINOR DOWNTREND (BULLISH)

How's that for a reversal?!  This relatively small inverted head and shoulders pattern marked the end to heating oil's minor downtrend and the beginning to a powerful rally.  As in the unleaded gasoline chart, the right shoulder dips a bit further than the left, but also gaps through the neckline!  Volume acts accordingly with a lessening of activity on each bottom and a burst of activity on the breakout.

INVERTED HEAD AND SHOULDERS AS A REVERSAL PATTERN IN A DOWNTREND (BULLISH)

Monthly Continuation (or Splice) Chart

The inverted head and shoulders reversed a lengthy downtrend.  As you can see, it also took about two years to complete the pattern.  But given the size and the duration of the ensuing bull run, it looks like it was worth the wait.  Keep in mind that on this example, we're using a monthly chart. Each bar represents a months worth of price and volume. Upon closer examination, you can see that the volume lightens up on the bottoms.  However, the jump in volume on the breaking of the neckline and especially on the continuing upmove is clearly visible.

INVERTED HEAD AND SHOULDERS AS A REVERSAL PATTERN IN A MINOR DOWNTREND (BULLISH)

The inverted head and shoulders reversed this minor downtrend.  The price traced out a classic pattern. While it's true there was a bit more activity on the right shoulder than the head, volume still showed a tendency to lighten on the bottoms with a pick-up on the breaking of the neckline.  You can also see the volume increase as the market continues its trek higher.

The information contained here was gathered from sources deemed reliable, however, no claim is made as to its accuracy or content. This does not contain specific recommendations to buy or sell at particular prices or times, nor should any of the examples presented be deemed as such. There is a risk of loss in trading futures and futures options and you should carefully consider your financial position before making any trades.  The reference to statistical probabilities does not pertain to profitability, but rather to the direction of the market. The size and the duration of the markets move, as well as entry and exit prices ultimately determines success or failure in a trade and is in no way represented in these statistics. Furthermore,  no representation is being made that any of the examples shown resulted in actual trades. This is not, nor is it intended to be, a complete study of chart patterns or technical analysis and should not be deemed as such.

Futures and options trading carries significant risk and you can lose some, all or even more than your investment.

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