What is a Worked Example of Inverse Head And Shoulders?

Direct answer

An inverse head and shoulders is a chart pattern described as a “three-lows” structure: a middle low (the “head”) that is lower than two surrounding lows (the “shoulders”), followed by price moving back above the pattern’s neckline area. A worked example is a fully specified, hypothetical scenario that shows (1) how you would label those lows and (2) how you might calculate a simple “measured move” using only the information from the drawing—without assuming any real-time data.

Mechanism and definition (what you can define up front)

Inverse head and shoulders is a visual framework for describing price action around three troughs:

Left shoulder low: the first trough.
Head low: the second, deepest trough.
Right shoulder low: the third trough, usually above the head.
Neckline: a level (often horizontal, but it can be drawn as an angle) that represents a resistance boundary between the lows and the subsequent recovery.

Because the labels “shoulder,” “head,” and “neckline” are drawn from the chart, the exact levels are not uniquely determined. A “worked example” should therefore state assumptions such as: how you choose the neckline, and whether you measure distances in absolute price units.

Worked numerical example (assumptions stated)

Assume a trader is looking at a chart where the y-axis is in a generic price unit and the time interval is irrelevant for the arithmetic. We will use only invented numbers.

Assumptions (every value used below is declared):

The pattern is drawn on a chart where prices are: Left shoulder low = 95, Head low = 90, Right shoulder low = 94.
The neckline is chosen horizontally at the recovery high after the right shoulder, defined as 98.
The “confirmation” event is defined purely for illustration as a close above the neckline at 99. (This is a modeling choice, not a guaranteed rule.)
For the measured move, we measure the vertical distance from head low to neckline.

Step-by-step:

Identify lows: head is the lowest at 90, shoulders are at 95 and 94.
Set neckline: neckline = 98.
Compute the vertical distance: distance = neckline − head = 98 − 90 = 8.
Notional target (measured move sketch): add the distance to the neckline: 98 + 8 = 106.

In this hypothetical drawing, the “worked example” shows how a sketch target of 106 could be derived from distances you measured on the chart (95/90/94 and neckline 98). Note the arithmetic is simple; the uncertainty is whether the drawing matches how another observer defines the pattern and neckline.

Limitations and risks (material failure modes)

Subjectivity in levels: neckline placement and “which lows count” can differ. Two people can measure different shoulders or draw different necklines, changing the measured move.
False confirmations: using “close above neckline” as a definition of confirmation can still fail when price re-enters the neckline region.
Scale and costs: even in a purely notional example, real outcomes depend on bid/ask spreads, commissions, slippage, and execution quality; these can materially affect whether any move you expect is tradable.
Regime changes: historical price relationships implied by the visual pattern do not establish that a similar move will occur in the future.

A worked example can be accurate in arithmetic while still being unreliable as a forecasting tool.

Verification and a next question to ask

If you want to independently verify an inverse head and shoulders instance, focus on checks that do not require predictions:

Can you clearly label three troughs where the middle low is lower than both surrounding lows?
Is there a defensible, repeatable way to draw the neckline from observable chart points?
If you compute a measured distance (neckline − head) and add it to the neckline, do you get a consistent level regardless of minor redraws?

A useful next question is: what rule set are you using to define the neckline and the “counting” of highs/lows? Changing that rule set changes the worked example’s numbers.

If you want, provide the three lows and the neckline you would draw from your chart (hypothetical numbers are fine), and I can reproduce the same arithmetic step-by-step while keeping the assumptions explicit.