A Roof pattern is a relatively new formation that was discovered by technical and author Thomas Bulkowski in 2005. New Jersey Resources Corp (NJR), a company in the natural gas industry, gave swing traders a glimpse of this pattern, and with it, an opportunity to consider it for a potential trade. Here’s what it looks like:

Screenshot-2021-04-13-at-9.23.54-AM-300x161 A Rare “Roof Pattern” in NJR Sets Up for a Tricky Swing Trade

The top of the pattern [A] minus the bottom at [B] gives us a “height” of $3.45. Subtract that from the bottom and you get a price target of $35.70 per share. That represents a 100% projection of the entire height. I represented the target with a box rather than a line simply because a trader may close out the short trade anywhere within the box.

 

Not only is this a rare pattern, but it’s also tricky as the probability of this “bearish” pattern rising (hence, a “bullish” continuation) is around 34%. So, proceed with caution.

 

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