|
Written by and copyright © 2005-2011 by Thomas N. Bulkowski. All rights reserved.
Ascending and Inverted Scallop Overview
For more information on this pattern, read
Encyclopedia of Chart Patterns, Second Edition  ,
pictured on the right, pages 639 to 653. That chapter gives a complete review of the chart pattern, compared to what is described below.
The inverted and ascending scallop looks like the right half of an
umbrella. The beauty of this chart pattern is that it performs so well in both bull and bear
markets, sporting a low break even failure rate and a large average rise.
Discovered by Thomas
Bulkowski in the early 2000's but it may have been uncovered by others earlier.
Important Bull Market Results for Ascending and Inverted Scallops
Overall performance rank (1 is best): 3 out of 23
Break even failure rate: 4%
Average rise: 43%
Throwback rate: 61%
Percentage meeting price target: 61%
The above numbers are based on hundreds of perfect trades. See the glossary for definitions.
Ascending and Inverted Scallop Identification Guidelines
| Characteristic | Discussion |
| Price trend | Upward leading to the pattern or at the bullish turning point of a downward price trend. |
| Shape | Inverted and backward J shape. It looks like the right half of an umbrella. The rise should be a straight, or nearly straight run up, then rounded at the top followed
by a small decline. |
| Smooth top | The peaks should form a rounded turn but larger patterns may not be as smooth. |
| Retrace | The end of the pattern on the right usually retraces 55% of the prior up move. Avoid 100% retraces. |
| Volume | Trends downward 71% of the time |
| Confirmation | The pattern confirms when price closes above the highest high in the pattern. |
Ascending and Inverted Scallop Trading Tips
Consult the associated figures on the right.
| Trading Tactic | Explanation |
| Measure rule | Compute the height from the highest peak (
B) to the lowest
valley in the pattern (A) and then multiply it by the
above “percentage meeting price target.” Add the difference to the
highest peak (B) to get a price target
C. The
link to the left provides more information on the measure rule. |
| Stop | If price drops below the right scallop edge, sell. See the measure rule figure to the right for the proper stop location. |
| Buy | Buy when price closes above the highest peak in the pattern (B). |
| Swingers | Swing traders will want to buy when price bottoms on the right and sell when it climbs to the top of the pattern. |
| Avoid | If price drops below the start of the pattern (A), then avoid this one. |
| Avoid valley | If price forms a distinct right valley and then price
drops below the valley, sell. The figure to the right ("New Stop Location") shows the proper location
for a stop in this situation. |
| Breakout volume | Heavy breakout volume suggests better performance. The
link shown to the left discusses statistics on breakout volume. The following
link gives additional
information on other chart patterns that also do well after heavy breakout volume. |
|
 The Measure Rule
 New Stop Location
|
Ascending and Inverted Scallop Example
The above figure shows an example of an inverted and ascending scallop chart pattern. Price bottoms at point
A and then rises to B where it rounds downward to
C.
To calculate a price target, subtract the price of valley A from peak
B. That finds the height. Multiply the height by 61% (the percentage
meeting price target from Important Bull Market Results table near the top of this page) and add the result to the
price at B. Place a stop loss order a few pennies below C,
and raise the stop as price climbs.
-- Thomas Bulkowski
Other Ascending and Inverted Scallop Examples
Copyright © 2008-2011 by Thomas N. Bulkowski. All rights reserved. Organized people are just too lazy to look for things.
|
. If you buy ANYTHING, they pay for the referral.
on 
