Descending Scallop | RizeTrade

What is the Descending Scallop Pattern?

The descending scallop pattern is a bearish continuation formation that resembles a series of rounded pullbacks within a downtrend. It typically appears after a strong decline when the price makes a curved recovery upward (forming a “scallop”) before resuming the downward move. This rounded retracement often traps early buyers before the market turns lower again, reinforcing the dominant bearish trend.

The pattern’s shape looks like an inverted “J” or a small curved bump against the trend, signaling temporary consolidation followed by renewed selling pressure.

🔑 Key Takeaways

 📉 The descending scallop is a bearish continuation pattern that develops within an ongoing downtrend.
 🕯️ It features a brief upward retracement before price resumes the downward move.
 ✅ A proper setup has a smooth, curved pullback forming lower highs below resistance.
 🎯 Entry signals trigger when price breaks beneath the scallop’s low, confirming trend continuation.
 💪 Reliability improves with fading volume during the pullback and strong volume on the breakdown.

📉 How Reliable Is the Descending Scallop Chart Pattern?

The Descending Scallop is a continuation setup that often forms during short-term pauses in a broader downtrend — but how effective is it at signaling further downside?

🧪 Our Internal Testing

Statement:
Using our Chart Pattern Performance Matrix, we performed an internal backtest to assess the Descending Scallop’s reliability across markets and volatility conditions.

Evidence:

• 1,268 Descending Scallop instances tested

• Markets: forex pairs, major stocks, and commodities

• Timeframes: 4H and Daily

• Tested in both volatile and stable environments

Insight:
The pattern worked best during strong, established downtrends, where momentum and volume confirmed the continuation. Premature entries — before a full candle close below the scallop’s support — frequently led to false breakouts or short-term retracements.

📈 Key Findings

Statement:
We compared the base pattern accuracy with setups incorporating additional confirmation indicators.

Evidence:

Insight:
👉 The Descending Scallop performs reliably as a continuation signal when validated by volume surges and trend-following indicators.
Traders can enhance precision by analyzing their trading performance to identify how confirmed breakdowns and volume alignment influence long-term results.

📉 How to Trade the Descending Scallop Pattern?

This bearish continuation pattern reflects a temporary upward retracement within a broader downtrend — a rounded pullback that often precedes another sharp decline.

🔍 Entry

Spot the Descending Scallop in a strong downtrend, where price forms a gentle curved recovery with lower highs and a smooth, rounded structure.
Enter short when price breaks and closes below the lowest point of the scallop curve, confirming that sellers have regained control.
Conservative traders may wait for a retest of the broken level before entering for added confirmation.

🛡️ Stop-Loss

Place your stop just above the highest point of the scallop curve to protect against false breakdowns or premature entries.
Adjust position size based on stop distance, ensuring you risk no more than 1–2% of total capital per trade.

🎯 Target

For conservative targets, aim for the nearest swing low or a 2:1 reward-to-risk ratio.
Aggressive traders can extend profit goals using Fibonacci extensions (1.272–1.618) of the prior swing or trail stops above lower highs to capture extended downside momentum.

Trading Strategies that Use the Descending Scallop Pattern

Descending Scallop with Volume Divergence

Concept
Volume validates the pattern and confirms breakout strength.

Setup
Watch for declining volume during the curved pullback.
Enter short when volume spikes on a breakdown below support.
The volume surge confirms renewed selling pressure and supports continuation.

Descending Scallop with Moving Average Filter

Concept
Exponential moving averages help filter false signals and confirm trend direction.

Setup
Apply the 20-EMA and 50-EMA to your chart.
Enter short when price trades below both EMAs and forms a descending scallop retracement.
The EMAs act as dynamic resistance during the pullback, reinforcing bearish bias.

Descending Scallop with RSI Confirmation

Concept
RSI confirms momentum alignment and continuation strength.

Setup
During the pullback, watch for RSI to rise toward 50.
Enter when RSI turns lower, aligning with the breakdown candle.
A drop below 40 confirms bearish momentum continuation.

Real Trading Example of the Descending Scallop Pattern

Consider AMD:
The stock fell from $120 to $102, then retraced gently to $108, forming a curved recovery resembling a descending scallop.
Volume decreased during the retracement, and sellers regained control once price broke below $102.
A short entry at $101.80 with a stop at $108 captured the move toward $94.
Using a trailing stop after the breakdown helped lock in profits as the bearish trend extended.

Best Indicators to Combine with the Descending Scallop Pattern

Common Mistakes and How to Avoid Them

Recognizing Failure Signals
A descending scallop can fail if the pullback extends too deeply or breaks above the scallop’s high before continuation.
Increasing volume during the retracement also signals strong buying pressure, warning of a potential pattern failure.

Tips for Trading the Descending Scallop Pattern

• Wait for a confirmed breakdown before entering; early entries often lead to whipsaws.

• Avoid setups where volume rises during the pullback, as it indicates possible reversal pressure.

• Strengthen consistency by maintaining a structured trading log to track setups, review results, and refine execution over time.

🔍 Descending Scallop vs. Bear Flag: Which Signals a Stronger Bearish Continuation?

Both the Descending Scallop and Bear Flag highlight bearish continuation phases — yet their structure and momentum behavior reveal distinct trading implications.

🧪 Internal Testing Overview

Statement:
We compared the Descending Scallop and Bear Flag patterns to evaluate breakout reliability and follow-through strength in ongoing downtrends.

Evidence:

• Dataset: 2,120 confirmed formations across Forex, indices, and crypto

• Timeframes: 1H, 4H, and Daily

• Validation rule: Breakdown confirmed when price closed below prior support and sustained that move for at least two consecutive sessions

• Metrics tracked: Breakdown accuracy and average continuation distance (in %)

Results Summary

💡 Insight

The Descending Scallop typically unfolds during slower market phases, providing smoother continuation signals but with less immediate momentum.
The Bear Flag, however, delivered faster and deeper follow-through, making it more effective for traders seeking short-term continuation setups with higher reward potential.

Traders refining their bearish playbook can analyze historical trade performance to determine which of these continuation structures aligns best with their risk appetite and execution style.