What it looks like
A fast, strong rise over a few candles. Then a pullback that retraces less than 50% of that rise: if the rise was 40 points, the dip is under 20. Price then pushes back up and a candle closes above the high of the first rise. Seen from a distance the two highs and the shallow dip in between look like an upside down H.
What it means
A sharp rise shows strong buying. A pullback that gives back less than half shows buyers were happy to keep holding and quick to buy the dip. When price clears the high again, those buyers are back in charge and the move is continuing. It is a picture of a trend that never really let go.
How to trade it
- 1
Measure the first sharp rise and check the dip gives back less than half of it.
- 2
Confirmation: a candle closes above the high of the first rise.
- 3
Entry: buy at that close.
- 4
Stop: below the low of the weak pullback. Example on gold: rise from 4,000 to 4,040 (40 points), dip to 4,026, close above at 4,042. Buy at 4,042, stop at 4,024, an 18 point risk.
- 5
Target: the size of the first move from the break, 4,040 plus 40 points, about 4,080.
A close back below the low of the weak pullback.
Where it works best
In strong trending sessions, such as the London or New York open on gold, where the first move comes with real activity behind it.
WickSpeak finds the inverted H pattern automatically and names it on the candles that made it. The note gives what it is, how to trade it and that a close below the pullback low proves it wrong. In Playbook you can use it as a condition in a play, alone or alongside other patterns and indicators (any of the 146 patterns can be a condition), and backtest it on past candles with your own costs.
Common mistakes
- Taking it when the dip retraces more than half, which is a weaker setup.
- Buying during the dip before the high has been broken.
- Measuring the target from the bottom of the dip instead of from the break.
Related patterns
Questions traders ask
Is the inverted H pattern bullish?
Yes. It is a bullish continuation: a sharp rise, a weak dip, then a new high. The H pattern is the bearish mirror.
How is it different from a bull flag?
Both are a sharp move then a shallow rest. A bull flag drifts back over several candles in a tidy channel; the inverted H is defined by the dip giving back less than half and price then clearing the high.
What target does the inverted H use?
A common target is the size of the first sharp rise, added to the break level. Use the next resistance if it is closer.
When is the pattern cancelled?
When price closes back below the low of the weak pullback. That means sellers have taken back more than the pattern allows.