Descending Scallop is a bearish continuation pattern that forms after a downward move, showing a short-lived rally before the downtrend resumes.
What Is a Descending Scallop Pattern in Trading?
The descending scallop is a bearish chart pattern that usually shows up after a run up, right when the tape starts losing lift. Price rolls over into a rounded top/valley structure (the “scallop”), then snaps lower once bids dry up and sellers lean on it. Visually it’s like an upside-down, backward J or the right side of an umbrella.
How Does a Descending Scallop Form? Key Stages
Initial down move: Price comes into the area with bearish pressure already building.
Retracement pop (Point A): Price bounces off support and prints the left peak with decent momentum.
Rounded fade: The bounce runs out of steam and price drifts into a wide, rounded correction, carving the scallop shape.
Break: Price breaks below the neckline (the low around Point A / the base of the structure), ideally with volume picking up.
What Volume Confirms a Descending Scallop Breakdown?
Volume matters here. The cleaner versions show a U-shaped volume profile: activity dries up as the left side forms (buyers get tired), then volume starts to build through the rounded portion.
The best confirmation is a clear volume expansion right as price punches through the neckline, because that’s when the breakdown stops being “noise” and starts being real selling.
Descending vs. Ascending Scallop: What’s the Difference?
Aspect | Descending Scallop | Ascending Scallop |
|---|---|---|
Trend Context | Bearish continuation / breakdown setup | Bullish continuation / breakout setup |
Shape | Backward J-shape | Forward J-shape |
Left vs Right Peak | Left peak higher | Right peak higher |
Breakout Direction | Downward break | Upward break |
How Do You Identify a Real Descending Scallop?
Getting the ID right is the whole game. A real descending scallop has a clean rounded structure, the left peak sits higher than the right, and volume behavior makes sense into the break.
If you start forcing random chop into a “pattern,” you’ll end up fading momentum at the worst time. Mislabeling it usually means you’re positioned against the dominant flow.
When it’s legit, it’s a solid way to time shorts in a bearish tape, especially if the neckline break comes with real participation.
How to Trade the Descending Scallop: Entries, Stops, and Exits
Seeing the pattern is easy. Getting paid is about execution: where you enter, where you’re wrong, and how you take profits.
Best Entry Signals for a Descending Scallop
Breakdown entry - Short when price trades and closes cleanly below the scallop’s low/neckline. That’s the “pattern is live” trigger.
Retest entry - Let it break, then wait for a pullback into the neckline area and short the rejection. You’ll miss some runners, but you usually get cleaner risk-to-reward and fewer head fakes.
Rejection candle entry - If price is rolling over on the right side, you can take a starter short on a bearish rejection candle at resistance (shooting star, bearish engulf, long upper wick). This is earlier and riskier, so you need tighter invalidation.
Where to Put a Stop Loss on a Descending Scallop
Conservative: stop above the left peak (the highest point of the structure).
Practical: stop above the right-side swing high if you’re entering on the break/retest.
If the market is noisy, use the most recent swing high plus a buffer so you don’t get wicked out by a stop run.
If you trade tight, a simple 2–3% stop above entry can work, but only if the name’s volatility supports it.
How to Set Profit Targets Using the Measured Move Rule
A straightforward way to project targets:
Measure the vertical distance from the highest peak to the lowest part of the rounded valley.
Use ~100–125% of that height as your base projection (some traders stretch it to 150% in strong trends).
Project that distance down from the breakout point.
Take first profits around 100%, then manage the rest for extension if the tape stays heavy.
Example: if the scallop height is $5, a reasonable downside objective is roughly $5 to $6.25 from the breakdown level.
When to Exit a Descending Scallop Trade
Profit targets - Scale out into your measured levels. If the move accelerates, trail the remainder so you don’t donate open profit back to the market.
Failure / invalidation - If price closes back above the right-side structure (or reclaims the neckline and holds), treat it as a failed breakdown and get out.
Trailing stops - Many traders start trailing once price has covered ~50% of the projected move, so you’re locking something in while still giving it room to trend.
Descending Scallop Buy vs. Sell Signal: What to Watch
Sell signal: break and close below the scallop low/neckline with volume confirmation. Buy signal: the breakdown fails and price reclaims the right-side level/neckline—at that point the short thesis is broken, and you’re managing risk, not “hoping.”
That discipline is what keeps one bad trade from wrecking a good month.
How to Confirm a Descending Scallop: Volume, Indicators, Checklist
What Confirms the Breakdown? Close, Neckline, and Volume
Confirmation is simple: price closes below the neckline / lowest valley, not just wicks through it. Then check volume. Ideally you see that U-shaped build and a clear pickup on the break.
When volume ramps into the breakdown and peaks at the trigger, it’s a better read that the move has real sponsorship instead of retail chop.
Best Indicators to Confirm a Descending Scallop Setup
Indicators aren’t the setup, but they help you avoid bad locations:
Moving averages: price below the 20/50/200-day (or your chosen set) supports the bearish bias.
RSI: below 50 is a simple momentum filter; staying weak on bounces is even better.
MACD: expanding negative histogram / bearish cross supports downside continuation.
Support & resistance: map the next demand zones under the neckline for target planning and partial covers.
Descending Scallop Checklist: What Validates the Pattern?
The higher-quality ones usually check most of these boxes: close below the lowest valley, volume expands on the break, any bounce after the break doesn’t reclaim more than ~70% of the drop, and price doesn’t get back above the right-side peak.
Put together, those filters cut down the fakeouts.
When Does a Descending Scallop Fail and Reverse?
If price retraces more than ~70% of the breakdown or rips back above the right-side peak, assume the pattern is failing. That’s when you tighten risk, cover, or step aside—because failed breakdowns can turn into fast upside moves.
Why Journal Descending Scallop Trades?
Logging these in a trading journal is more useful than people think. Track what the volume looked like, whether the retest held, what the RSI/MAs were doing, and how far it moved versus the measured target.
Over time you’ll know which version of the scallop actually pays in your market (SPY, BTC, crude oil, small caps, whatever you trade).
Descending Scallop: Continuation Signal or Reversal Warning?
The descending scallop works best when sellers already have control and the market is in a broader downtrend. Most of the time it acts like a continuation setup, and the commonly cited stats put downside breaks around 78%.
It tends to form cleaner after price has already taken a meaningful hit and rallies start failing into overhead supply. In that environment, resistance is obvious, bounces get sold earlier, and the scallop’s “rounded fade” is basically the market bleeding out demand.
The consolidation is the tell. Buyers try to stabilize it, but the rebound is sluggish and each push loses energy. Price churns in a rounded arc, then the neckline becomes the line in the sand.
"When sellers regain control and breach the neckline support, they signal renewed commitment to extending the downtrend, validating the pattern's bearish premise."
The tricky part is separating a normal continuation from a busted breakdown. If it breaks and then can’t follow through—say it drops less than ~10% and snaps back hard—that failure often turns into a reversal trade. In other words, the same structure that sets up shorts can become fuel for a squeeze if the breakdown doesn’t stick.
Watch how price behaves around the neckline. A decisive close below it favors continuation. A quick reclaim, especially with strong bids and expanding volume, is your warning that the sellers didn’t finish the job.
Advanced Descending Scallop Strategies: Confluence and Market Context
One of the better plays is the busted descending scallop: it breaks down, can’t follow through, then rips back above the key level. That failure often turns into an upside trade because trapped shorts become buyers.
Bulkowski also notes strong expectancy on buying these busted signals, especially when you’re exiting into the next bearish setup that isn’t busted.
How to Combine the Scallop With Other Technical Signals
Scallops work better when they line up with other structure. Think: neckline break + prior support shelf + moving average resistance + a clean downtrend channel.
The more independent reasons you have for the same trade idea, the less you’re relying on one squishy shape.
Best Market Conditions and Timeframes for Descending Scallops
Timeframes: 4H and daily tend to be cleaner for swing trades; 15-minute to 1H can work for day trades if liquidity is solid.
Market type: trending markets are best. Volatility can help, but only if structure is still readable.
Risk per trade: many traders cap it around 1–3%. Scale only when the market confirms, not because you “feel right.”
How to Trade Descending Scallops: Day vs Swing vs Position
Day traders usually hit the breakdown and manage fast—tight stops, quick partials, no marrying it. Swing traders give it room and target the measured move over a few sessions.
Position traders care more about the weekly structure and will wait for a full break/close before committing size.
How to Improve Profitability With Scaling and Trade Management
Scaling can improve outcomes: starter on the break, add on a clean retest rejection, then reduce risk as it moves in your favor. Take partials into obvious support, and trail the rest behind lower highs. If the pattern invalidates, cut it—no debate.
Descending Scallop Success Rate: Stats, Edge, and Real Outcomes
Backtests show descending scallops can be productive when they’re identified correctly. Bulkowski’s updated 2020 stats cite a downside break around 78%, with upside failures around 22%. Treat that as a probability edge, not a promise.
What usually decides whether you actually make money on it:
Trend strength: the pattern behaves best when the broader trend is clear. In sideways chop, it’s more coin-flip.
Volume quality: breakdowns on thin volume fail more often. Heavy volume at the trigger is the difference between a real flush and a dip-buying magnet.
Volatility regime: high vol can pay fast, but it also increases wicks, stop hunts, and false breaks.
Clean identification: forcing the shape is how traders end up shorting support or buying into supply.
Descending Scallop Trading Risks and Limitations
False breakdowns in choppy, headline-driven markets
Whipsaws during the rounded consolidation
Asset-specific behavior (a thin small-cap doesn’t trade like EUR/USD)
Timeframe dependency (a 5-minute scallop isn’t the same as a daily scallop)
Market regime shifts that change follow-through characteristics
Use the 78% number as a baseline edge. Your actual results come from entries, stops, sizing, and whether you’re trading it in the right tape.
Descending Scallop Pattern: Key Takeaways for Traders
The descending scallop is a useful bearish setup when it’s clean: backward J shape, rounded fade, left peak higher than the right, then a neckline break with real volume. The stats (around 78% downside breaks) are good enough to build a playbook around, but only if you’re selective.
The money part is mechanical: define the trigger (close below neckline), define “wrong” (stop above the right-side high or peak depending on entry), and use a measured move for targets so you’re not improvising mid-trade.
It also shouldn’t live on an island. Blend it with market context, support/resistance, and a couple of indicators you actually trust. If the breakdown fails and reclaims key levels, respect it—busted patterns can move harder than the clean ones.
Study a bunch of real charts, log the outcomes, and you’ll get a feel for which scallops are worth trading and which are just a soccer ball of chop rolling around inside a range.
How Do You Turn Descending Scallop Reads Into Repeatable Results Over Time?
Once you understand the structure—rounded fade, neckline trigger, and volume behavior—the next step is proving (or disproving) that the setup actually delivers in your market and timeframe. That’s where consistent review matters: record the entry type you used (break, retest, or early rejection), the stop placement, and whether the move reached the measured target or failed and reclaimed the neckline. Just as important, note context like trend strength, volatility regime, and how clean the close was versus a wick-through.
A simple trading journal turns those observations into usable statistics: win rate by entry style, average R multiple, PnL distribution, and common failure modes (thin-volume breaks, choppy tape, headline spikes). Using a dedicated tracker with analytics—such as Rizetrade trading journal software for trade tracking and performance metrics—helps you monitor patterns across many trades, tighten decision-making, and build a playbook based on evidence instead of memory.