As of 10/29/2020
  Indus: 26,659 +139.16 +0.5%  
  Trans: 11,184 +237.90 +2.2%  
  Utils: 868 +2.32 +0.3%  
  Nasdaq: 11,186 +180.72 +1.6%  
  S&P 500: 3,310 +39.08 +1.2%  
YTD
-6.6%  
 +2.6%  
-1.3%  
 +24.7%  
 +2.5%  
  Targets    Overview: 09/29/2020  
  Up arrow29,300 or 27,400 by 11/01/2020
  Up arrow12,000 or 11,000 by 11/01/2020
  Up arrow915 or 840 by 11/01/2020
  Up arrow12,800 or 11,300 by 11/01/2020
  Up arrow3,700 or 3,400 by 11/01/2020
CPI (updated daily): Arrows on 10/23/20
As of 10/29/2020
  Indus: 26,659 +139.16 +0.5%  
  Trans: 11,184 +237.90 +2.2%  
  Utils: 868 +2.32 +0.3%  
  Nasdaq: 11,186 +180.72 +1.6%  
  S&P 500: 3,310 +39.08 +1.2%  
YTD
-6.6%  
 +2.6%  
-1.3%  
 +24.7%  
 +2.5%  
  Targets    Overview: 09/29/2020  
  Up arrow29,300 or 27,400 by 11/01/2020
  Up arrow12,000 or 11,000 by 11/01/2020
  Up arrow915 or 840 by 11/01/2020
  Up arrow12,800 or 11,300 by 11/01/2020
  Up arrow3,700 or 3,400 by 11/01/2020
CPI (updated daily): Arrows on 10/23/20

Bulkowski on Inverted and Descending Scallops

 

Statistics updated on 8/27/2020.

For more information on this pattern, read Encyclopedia of Chart PatternsEncyclopedia of Chart Patterns 2nd Edition book., pictured on the right. The book gives a complete review of the chart pattern, including tour, identification guidelines, focus on failures, performance statistics, trading tactics, and sample trade. Below is just a sliver of the information contained in the book.

Inverted and descending scallops are robust performers in bull markets. Once the downward trend ends - if you can tell when that occurs - then buy and ride the new uptrend. Discovered by Thomas Bulkowski in mid 2004, but others may have found them sooner.

Inverted and descending scallop chart pattern
Inverted and Descending Scallop

 

Inverted and Descending Scallops: Important Bull Market Results

Overall performance rank (1 is best): 9 out of 39/10 out of 36
Break even failure rate (up/down breakouts): 16%/17%
Average rise/decline: 47%/16%
Throwback/pullback rate: 58%/66%
Percentage meeting price target (up/down breakouts): 62%/29%

The above numbers are based on more than 1,500 perfect trades. See the glossary for definitions.

Inverted and Descending Scallops: Identification Guidelines

CharacteristicDiscussion
Price trendUsually downward leading to the scallop or at bearish turning points.
ShapeLooks line an inverted J.
Smooth topLook for a rounded top, not V-shaped, but be flexible.
Down moveFrom the start of the pattern (point A in the above chart) to its high (B) averages 56% of the following down move from highest peak (B) to scallop end (C, the lowest valley).
EndsBoth the scallop start and end should form at price turning points.
ProportionThe height and width of the scallop should look proportional.
ConfirmationThe scallop confirms as valid when price closes below the lowest valley in the pattern without first closing above the scallop's peak.

Top of page More

Inverted and Descending Scallops: Trading Tips

Trading TacticExplanation
Measure ruleCompute the height from highest peak (point B in the Measure Rule chart to the right) to lowest valley (C) then multiply it by the above 'percentage meeting price target.' Subtract the result from the lowest valley in the pattern (C) to get a price target for a downward breakout. Add the height to the top of the pattern for an upward breakout.
ShortFor downward breakouts, short the stock when price closes below the lowest valley in the pattern (C in the Measure Rule figure to the right).
CoverIf price retraces (rises) 67% of the decline from B to C in the Measure Rule figure to the right, then cover the short.
Volume trendScallops with upward breakouts and a rising volume trend perform best.
ConfirmationWait for confirmation before placing a trade.
HeightTall scallops perform better than short ones.
TrendScallops get narrower and shorter the lower they appear in a price trend.
ThrowbacksThrowbacks hurt performance.
Inverted and descending scallops chart pattern measure rule
The Measure Rule

Top of page More

Inverted and Descending Scallops: Example

Inverted and descending scallop chart pattern example

The above figure shows an example of an inverted and descending scallop chart pattern. Point A begins the inverted scallop pattern and price peaks at B and then trends down to C, the end of the scallop. This one forms a handle, D, and that is quite common. Price resumes the downtrend after the handle completes.

-- Thomas Bulkowski

Top of page More

See Also

 

Support this site! Clicking any of the books (below) takes you to Amazon.com. If you buy ANYTHING while there, they pay for the referral.

My novels:  Bumper's Story Head's Law

Chart Patterns: After the Buy Getting Started in Chart Patterns, Second Edition Trading Basics Fundamental Analysis and Position Trading Swing and Day Trading Visual Guide to Chart Patterns Encyclopedia of Candlestick Charts Encyclopedia of Chart Patterns 2nd Edition Trading Classic Chart Patterns

Copyright © 2005-2020 by Thomas N. Bulkowski. All rights reserved.
Disclaimer: You alone are responsible for your investment decisions. See Privacy/Disclaimer for more information.
Some pattern names are registered trademarks of their respective owners.

Home Advertise Contact Donate Links Privacy/Disclaimer

All computers wait at the same speed.Smiley