The head and shoulders bottom is a typical technical analysis pattern, which is usually regarded as an important signal of market trend reversal.
Pattern structure
Left shoulder: In a downward trend, the price falls to a certain level and then rebounds, and then falls again to form a left shoulder. The volume of the left shoulder is relatively small, indicating that the market is still under heavy selling pressure at this stage, but some buying has begun to intervene. Head: After the price falls to the left shoulder, it continues to bottom out, forming a lower low than the left shoulder, and then rebounds sharply. The volume of the head is usually higher than that of the left shoulder, which shows that more buying has begun to enter the market and the supply and demand relationship in the market is changing. Right shoulder: After the price rebounds from the head, it falls again, but the low point of this decline is higher than the low point of the head, and then it starts to rebound. The volume of the right shoulder is generally smaller than that of the head, but it may be slightly larger or similar to that of the left shoulder, indicating that the selling pressure in the market is gradually easing and the bullish force is gradually increasing. Neckline: Connect the high points after the rebound of the left shoulder and the right shoulder to form a straight line, which is the neckline. The neckline is the key reference line of the head and shoulders bottom pattern. Before the price breaks through the neckline, the head and shoulders bottom pattern has not been fully established.
