Chart Pattern Inverse Head And Shoulders

Inverted head and shoulders is a reversal pattern formed by three consecutive lows and two intermediate highs. The first and third lows are called shoulders. They are located approximately at the same level above the second – the head. Also, important is the line drawn along the intermediate highs – the neckline. The pattern is considered completed only when the price, having formed the right shoulder, rises above the neckline. It is expected that further price movement up will be approximately equal to the height of the head.

The indicator searches for patterns on the last 600 bars. The pattern consists of lines indicating price movements (Price Line) and neck lines (Neck Line). The neck line is drawn through intermediate highs and is limited by intersections with price lines. The start and end points of each price line, except for the last one (point 7), are located in 5/5 pivots. Point 7 is located at the intersection of the last price line with the neck line. In the In Progress mode, the indicator looks for not only formed, but also emerging patterns. The right shoulder of such a pattern may not be in the pivot, and the price lines forming it will be dotted.

The pattern is considered formed when, after the formation of the right shoulder, the price (close) rises above the neckline. The dotted horizontal line that ends with the Target label indicates the expected price level after the pattern has formed. As new bars appear, the line extends to the right until the last bar, until the pattern status changes from Awaiting to another. The label tooltip shows the price and the current status of the pattern. When the status changes, the color of the label also changes. There are 3 statuses in total:

  • Awaiting. The price did not reach the expected level and did not go below the right shoulder.
  • Reached. The price reached the expected level.
  • Failed. The price did not reach the expected level and went below the right shoulder.

If the indicator finds two intersecting patterns, then preference is given to the one whose status is Awaiting. If the status of the intersecting patterns is Failed or Reached or the status of both is Awaiting, then the chart will display the pattern whose neckline is closer to the horizontal line and whose difference in shoulder values is smaller.

Inputs:

  • Trend Height – Sets the required height of the trend preceding the pattern relative to the height of the head. The height of the head is calculated as the difference between the price value of the pivot, in which the head is located, and the neck lines on the same bar. Percent value.
  • Minimum required difference – The minimum required difference in shoulder and head height. The shoulder height is calculated as the difference between the value of the price of the pivot, in which it is located, and the neck line on the same bar. Percent value.
  • Maximum slope of the neck line – The maximum allowable height difference between the left and right price lines that form the head. Percent value.
  • Shoulders height maximum difference – The maximum allowable difference in the height of the left and right shoulders. Percent value.
  • Shoulders width maximum difference – The maximum allowable shoulder width difference. Percent value.
  • In Progress – Search for patterns that have not been fully formed yet.