GBPJPY analysis - 8 components of inverse head and shoulder pattern...



When trading using chart patterns, bear in mind that pattern failures do occur and "a pattern is not a pattern until it is completed".

For example, the inverse head and shoulder pattern has eight basic components before the pattern completes; namely:
  1. A prior downtrend
  2. A left shoulder follows by a correction rally to the neckline
  3. A decline to a new low to form the "head" portion
  4. A rally towards the neckline again
  5. A third decline to the right shoulder
  6. A break above the neckline and forms a new high
  7. A throwback towards the neckline
  8. A rally upwards and breaks the new high resistance
Only after ALL these components are completed, the bulls can come in and declare victory.

Otherwise, the prior trend should be considered as remains intact.

IMPORTANT NOTE: a price close below the neckline will invalidate the inverse head and shoulder pattern.

Below is the daily chart for comparison purpose:


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