As of 11/11/2019
  Indus: 27,691 +10.25 +0.0%  
  Trans: 11,030 -37.61 -0.3%  
  Utils: 830 -5.55 -0.7%  
  Nasdaq: 8,464 -11.03 -0.1%  
  S&P 500: 3,087 -6.07 -0.2%  
YTD
 +18.7%  
 +20.3%  
 +16.4%  
 +27.6%  
 +23.1%  
  Targets    Overview: 10/31/2019  
  Up arrow27,750 or 26,900 by 11/15/2019
  Up arrow11,300 or 10,100 by 11/15/2019
  Up arrow870 or 800 by 12/01/2019
  Up arrow8,500 or 8,000 by 11/15/2019
  Up arrow3,150 or 2,950 by 11/15/2019
As of 11/11/2019
  Indus: 27,691 +10.25 +0.0%  
  Trans: 11,030 -37.61 -0.3%  
  Utils: 830 -5.55 -0.7%  
  Nasdaq: 8,464 -11.03 -0.1%  
  S&P 500: 3,087 -6.07 -0.2%  
YTD
 +18.7%  
 +20.3%  
 +16.4%  
 +27.6%  
 +23.1%  
  Targets    Overview: 10/31/2019  
  Up arrow27,750 or 26,900 by 11/15/2019
  Up arrow11,300 or 10,100 by 11/15/2019
  Up arrow870 or 800 by 12/01/2019
  Up arrow8,500 or 8,000 by 11/15/2019
  Up arrow3,150 or 2,950 by 11/15/2019

Bulkowski's Inverted Roof

 

Statistics updated 6/25/2019.

The inverted roof chart pattern is one I discovered in early 2005. The name is based on its complement, the roof chart pattern. I found 533 inverted roofs in 377 stocks from July 1991 to April 2019.

Inverted roof chart pattern
Inverted Roof Chart Pattern

 

Important Bull Market Results for the Inverted Roof

Overall rank for up/down breakouts: 17 out of 56/34 out of 53
Break even failure rate for up/down breakouts: 22%; 25%
Average rise/decline: 34%; 14%
Throwback/pullback rate: 58%; 64%
Percentage meeting price target for up/down breakouts: 67%; 57%

The above numbers are based on hundreds of perfect trades. See the glossary for definitions.

Inverted Roof Identification Guidelines

CharacteristicDiscussion
Price trendCan be any direction leading to the pattern.
ShapeHas a horizontal or near horizontal top with a V-shaped bottom, making the entire structure look like the bottom half of a diamond. See the above figure.
UptrendThe best performing inverted roof chart patterns appear after a sharp rise like you sometimes see in diamond top chart patterns.
SymmetricalThe two halves of the inverted roof chart pattern should appear symmetrical. Allow variations, but most look like a V with price touching the horizontal top often.
Head-and-shoulders bottomMake sure the pattern isn't a head-and-shoulders bottom or a complex head-and-shoulders bottom, but inverted roofs can be a subset of a head-and-shoulders (simple or complex variety) providing the neckline is horizontal.
ConfirmationThe pattern confirms as valid when price closes outside the chart pattern trendline boundary.

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Inverted Roof Trading Tips

Trading TacticExplanation Inverted roof chart pattern measure rule
The Measure Rule

Inverted roof chart pattern price trend

Price Trend

Measure ruleCompute the height (the difference between the inverted roof's high, B, and the low, A) and then multiply it by the above “percentage meeting price target.” Add or subtract the result from the breakout price to get a target. The Measure Rule figure to the right shows the measure for an upward breakout.
UptrendsA strong downtrend usually follows a sharp uptrend, returning price back to (or slightly above) the launch point. The Price Trend figure to the right shows an example.
ConfirmationWait for confirmation before placing a trade because the breakout can be upward or downward.
Throwbacks and PullbacksThrowbacks and pullbacks hurt performance.

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Inverted Roof Example

Inverted roof chart pattern example

The above figure shows an example of an inverted roof chart pattern. Price begins the climb into the inverted roof at A and overshoots the top of the pattern (which happens about 15% of the time). The breakout from the inverted roof is downward and price returns to the launch price at B. A pullback ensues, sending price back to the breakout and it moves sideways from then on.

-- Thomas Bulkowski

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Other Inverted Roof Examples

See Also

 

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My novels:      New                  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 © 2005-2019 by Thomas N. Bulkowski. All rights reserved.
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Some pattern names are registered trademarks of their respective owners.

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