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Inverted Head and Shoulders Patterns

Inverse Head and Shoulders on #MMM

Inverse Head and Shoulders on #MMM

Inverse Head and Shoulders on #MMM is a classical chart pattern which is located at the end of a 38% drop. Therefore it might signal a reversal.

The premise

I must start with the fact that this is one of the most interesting chart patterns that I saw. And let me show you why. First, let’s take a look at the daily chart of #MMM (3M Co). We’ll see an inverted head and shoulders pattern which is located at the end of a 38% drop. It is this pattern which offered the first buy opportunity for #MMM.

inverse-head-and-shoulders-on-mmm-detail
Inverse head and shoulders on #MMM daily chart detail

A small detail off the topic

This is the sixth article from a series of twelve in which I explain how did I make +8.72% in a single trading day. The first articles are #AMZN, #TRV, #TSLA, USDCAD and FTSE100.

How did I trade the inverse head and shoulders on #MMM

I simply placed a buy stop order slightly above the inverted SHS pattern neckline. And, I considered the March 31st 2020 daily candle high as the ultimate resistance. Consequently my order is open on April 6th 2020.

The outcome

As I explained in this article +8.72% in a single trading day I also closed this trade without a technical reason. But, what is more important is about to come. So, let’s take a look again at the daily chart of the #MMM and let’s see what happened after the breakout.

the-outcome-of-the-inverse-head-and-shoulders-on-mmm
The outcome of the inverse head and shoulders on #MMM daily chart

So, our initial inverted head and shoulders pattern became an island bottom. And after that, the price consolidated in that area and in the consolidation process, it simply morphed into a larger inverted SHS pattern. And, the larger inverted head and shoulders pattern experienced a valid breakout. So, by doing that, the price reached the target of our initial inverted SHS pattern. Therefore, all I can say is: welcome in the fascinating world of chart patterns.

The conclusion of the inverse head and shoulders on #MMM

Trading chart patterns is not an easy thing. But, once you reach a certain level of experience the things are starting to change. And from my point of view, it becomes fascinating to discover and trade a lot of different chart patterns. And when you add to this patterns a proper risk and money management and an asymmetrical risk reward ratio everything become profitable and also a pleasure in the same time.

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