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Thomas Bulkowski’s successful investment activities allowed him to retire at age 36. He is an internationally known author and trader with 30+ years of stock market experience and widely regarded as a leading expert on chart patterns. He may be reached at

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Picture of the Tears for Bumper.
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Chart Patterns: After the Buy
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Bulkowski's Roof

Class Elliott Wave Fundamentals Psychology Quiz Research Setups Software Tutorials More...
Busted
Patterns
Candles Chart
Patterns
Event
Patterns
Small Patterns
Market
Industrials (^DJI):
Transports (^DJT):
Utilities (^DJU):
Nasdaq (^IXIC):
S&P500 (^GSPC):
As of 05/26/2017
21,080 -2.67 0.0%
9,176 12.36 0.1%
720 -0.08 0.0%
6,210 4.93 0.1%
2,416 0.75 0.0%
YTD
6.7%
1.5%
9.2%
15.4%
7.9%
Tom's Targets    Overview: 05/15/2017
21,400 or 20,450 by 06/01/2017
9,500 or 8,700 by 06/01/2017
730 or 700 by 06/15/2017
6,350 or 6,000 by 06/01/2017
2,450 or 2,375 by 06/15/2017

Written by and copyright © 2005-2017 by Thomas N. Bulkowski. All rights reserved. Disclaimer: You alone are responsible for your investment decisions. See Privacy/Disclaimer for more information.

My book, Encyclopedia of Chart Patterns Second EditionEncyclopedia of Chart Patterns 2nd Edition book., pictured on the left, discusses 63 other chart and event patterns, but the roof is not one of them. Sorry.

If you click on this link and then buy the book (or anything) at Amazon.com, the referral will help support this site. Thanks. -- Tom Bulkowski

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The roof pattern is one I discovered in early 2005. I thought of it as a half diamond but a friend called it a roof pattern and that's more descriptive. I found 203 roofs in 500 stocks from July 1991 to July 1996. That's one pattern for every 12 years of data, which makes it a rare one indeed. Since it's performance is dreadful, it's not one you should concern yourself with.

Roof chart pattern
Roof Chart Pattern

 

Roof: Important Bull Market Results

Overall rank: 17 out of 21
Break even failure rate: 13%
Average decline: 16%
Pullback rate: 56%
Percentage meeting price target: 68%

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

Roof Identification Guidelines

CharacteristicDiscussion
Daily or weekly chartUse the daily or weekly chart to locate roof patterns.
Price trendUsually upward leading to the pattern.
ShapeHas a horizontal or near horizontal bottom with up sloping trend in the first part of the pattern followed by a down-sloping trend in the last part of the pattern.
UptrendThe best performing roof patterns appear after a sharp rise like you sometimes see in diamond patterns.
SymmetricalThe two halves of the roof should appear symmetrical. Allow variations, but most look like an inverted V with price touching the horizontal bottom often.
Head-and-shoulders topMake sure the pattern isn't a head-and-shoulders top or a complex head-and-shoulders top.
ConfirmationThe pattern confirms as valid when price closes below the lowest price in the pattern.
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Roof Trading Tips

Trading TacticExplanation
Measure ruleReference the Measure Rule figure to the right. Compute the height (the difference between the roof's high, A, and the low, B) and then multiply it by the above “percentage meeting price target.” Subtract the result from the lowest low in the pattern (B) to get a target. The Measure Rule figure to the right shows the measure for a downward breakout.
UptrendsThe best performing roofs appear at the top of uptrends lasting less than 3 months in duration. A strong downtrend usually follows a sharp uptrend, returning price back to (or slightly above) the launch point.
ConfirmationWait for confirmation before placing a trade because the breakout can be upward (but it's rare, occurring just 17% of the time)
PullbacksPullbacks hurt performance.
HeightTall patterns outperform short ones. Measure the height from highest peak to the horizontal bottom and divide it by the price of the horizontal bottom (the breakout price). Height to breakout price values over 8.82% are considered tall.
Roof chart pattern measure rule
The Measure Rule
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Roof Example

Roof chart pattern example

The above figure shows an example of a roof chart pattern. This is an unusual one because it has an upward breakout. However, it was so well defined, that I just had to show you. Aren't you impressed?

-- Thomas Bulkowski

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Other Roof Examples

See Also

Written by and copyright © 2005-2017 by Thomas N. Bulkowski. All rights reserved. Disclaimer: You alone are responsible for your investment decisions. See Privacy/Disclaimer for more information. We make a living by what we get, but we make a life by what we give.