Technical analysis II

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11. Head and shoulders bottom

A Head and Shoulders Bottom is the inverse of a Head and Shoulders Top, and it signifies a reversal from a downtrend to an uptrend.

A head and shoulders bottom

The main difference between this and the Head and Shoulders Top is in the volume pattern associated with the share price movements.

The volume should pick up as the prices increase from the bottom of the head and then increase even more on the rally which follows the right shoulder. If the neckline is broken but volume is low, you should be sceptical about the validity of the formation.

1. Average share prices 2. Moving averages 3. Weighted moving averages 4. Where to plot moving averages 5. Interpreting moving averages - the basics 6. Classic interpretation of moving averages 7. Combining short and long term moving averages 8. Moving average convergence/divergence (MACD) 9. Reversal patterns 10. Head and shoulders top 11. Head and shoulders bottom 12. Double top 13. Double bottom 14. Rounding tops and bottoms 15. Broadening formations 16. Wedge formations 17. The momentum indicator 18. The momentum oscillator 19. Rate of change indicator 20. Price minus average 21. Relative strength indicator 22. Conclusion

• Martin Pring's Introduction to Technical Analysis
• Technical Analysis Plain and Simple
• Technical Analysis of the Financial Markets
• An Introduction to Technical Analysis - Reuters Financial Training Series