Market
Industrials (^DJI):
Transports (^DJT):
Utilities (^DJU):
Nasdaq (^IXIC):
S&P500 (^GSPC):
|
As of 06/15/2018
25,090 -84.83 -0.3%
11,074 64.50 0.6%
678 5.01 0.7%
7,746 -14.66 -0.2%
2,780 -2.83 -0.1%
|
YTD
1.5%
4.4%
-6.2%
12.2%
4.0%
|
 25,750 or 24,500 by 07/01/2018 11,350 or 10,600 by 07/01/2018
695 or 645 by 07/01/2018
8,000 or 7,500 by 07/01/2018
2,850 or 2,700 by 07/01/2018
|
|
|
|
Written by and copyright © 2005-2018 by Thomas N. Bulkowski. All rights reserved. Disclaimer: You alone are responsible for your investment decisions.
See Privacy/Disclaimer for more information.
For more information on this pattern, read
Encyclopedia of Chart Patterns Second Edition  ,
pictured on the right, pages 670 to 683. That chapter 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 both bull and bear markets (slightly
better in a bear market). 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
|
Important Bull Market Results for Inverted and Descending Scallops
Overall performance rank (1 is best): 6 out of 21
Break even failure rate: 10%
Average decline: 18%
Pullback rate: 58%
Percentage meeting price target: 38%
The above numbers are based on hundreds of perfect trades. See the glossary for definitions.
|
|
Inverted and Descending Scallop Identification Guidelines
| Characteristic | Discussion |
| Price trend | Downward leading to the scallop or at bearish turning points. |
| Shape | Looks line an inverted J. |
| Smooth top | Look for a rounded top, not V-shaped. |
| Down move | From the start of the pattern (point A in the above chart) to its high (B) averages 55% of the following down move from highest peak (B) to scallop end (C, the lowest valley). |
| Ends | Both the scallop start and end should form at price turning points. |
| Proportion | The height and width of the scallop should look proportional. |
| Confirmation | The scallop confirms as valid when price closes below the lowest valley in the pattern without first closing above the scallop's peak. |
Inverted and Descending Scallop Trading Tips
| Trading Tactic | Explanation |
| Measure rule | Compute 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. |
| Short | Short the stock when price closes below the lowest valley in the pattern (C in the Measure Rule figure to the right). |
| Cover | If price retraces (rises) 67% of the decline from B to C in the Measure Rule
figure to the right, then cover the short. |
| Volume trend | Scallops with a falling volume trend perform best. |
| Confirmation | Wait for confirmation before placing a trade. |
| Height | Tall scallops perform better than short ones. |
| Trend | Scallops get narrower and shorter the lower they appear in a price trend. |
| Pullbacks | Pullbacks hurt performance. |
|
 The Measure Rule
|
Inverted and Descending Scallop 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
Written by and copyright © 2005-2018 by Thomas N. Bulkowski. All rights reserved. Disclaimer: You alone are responsible for your investment decisions.
See Privacy/Disclaimer for more information.
All computers wait at the same speed.
|
on 
