As of 05/23/2024
  Indus: 39,065 -605.78 -1.5%  
  Trans: 15,009 -185.73 -1.2%  
  Utils: 924 -20.84 -2.2%  
  Nasdaq: 16,736 -65.51 -0.4%  
  S&P 500: 5,268 -39.17 -0.7%  
YTD
 +3.7%  
-5.6%  
 +4.8%  
 +11.5%  
 +10.4%  
  Targets    Overview: 05/13/2024  
  Up arrow41,000 or 38,500 by 06/01/2024
  Up arrow16,050 or 15,300 by 06/01/2024
  Up arrow960 or 900 by 06/01/2024
  Up arrow17,250 or 15,850 by 06/01/2024
  Up arrow5,500 or 5,100 by 06/01/2024
As of 05/23/2024
  Indus: 39,065 -605.78 -1.5%  
  Trans: 15,009 -185.73 -1.2%  
  Utils: 924 -20.84 -2.2%  
  Nasdaq: 16,736 -65.51 -0.4%  
  S&P 500: 5,268 -39.17 -0.7%  
YTD
 +3.7%  
-5.6%  
 +4.8%  
 +11.5%  
 +10.4%  
  Targets    Overview: 05/13/2024  
  Up arrow41,000 or 38,500 by 06/01/2024
  Up arrow16,050 or 15,300 by 06/01/2024
  Up arrow960 or 900 by 06/01/2024
  Up arrow17,250 or 15,850 by 06/01/2024
  Up arrow5,500 or 5,100 by 06/01/2024

Bulkowski on Inverted Roofs

Statistics updated 8/26/2020.

The inverted roof chart pattern is one I discovered in early 2005. The name is based on its complement, the roof chart pattern.

Inverted roof chart pattern
Inverted Roof Chart Pattern

 

Inverted Roof: Important Bull Market Results

Overall rank for up/down breakouts: 37 out of 39/26 out of 36
Break even failure rate for up/down breakouts: 23%/25%
Average rise/decline: 34%/14%
Throwback/pullback rate: 58%/64%
Percentage meeting price target for up/down breakouts: 65%/47%

The above numbers are based on more than 450 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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See Also

 

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