An inverse head and shoulder (a.k.a head and shoulder bottom) chart pattern is used in bullish technical analysis of any chart in stock market.
Identification: It begins with the formation of a left trough, a middle trough (lower than the other two) and a right trough (same approximate depth as that of the left trough). All these three have on a common peak line known as neckline.
Occurrence: The head and shoulders pattern forms when a stock’s price falls to create a left trough (due to a decline in volume) and then moves up to the neckline of the prior up-move (defining a neckline). Then from the neckline, the price falls below the left trough (left shoulder) to form the “head” and then ascends back to the neckline again. Finally, the stock price falls again at approximately the level of the left shoulder of the formation before going for a break through (defining the beginning of an uptrend). This whole chart pattern defines the creation of an inverse head and shoulder chart pattern.
Study: The head and shoulders pattern is considered as one of the most reliable trend reversal patterns. This inverse head and shoulder pattern suggests that a downward trend is nearing its end i.e a bullish trend is beginning.