Roof

Core idea

A roof is a sharply pointed, inverted-V price peak. Price climbs steeply on the left side, prints a single high (no rounded crown, no double top), and falls just as steeply on the right side. The two flanks have similar slopes and similar durations, giving the structure its symmetric tent-like shape. Roofs are reversal patterns: the prior trend was up, the subsequent trend is down, and the transition takes place at one bar — or at most a small handful of bars — at the apex.

Roofs are distinct from V-tops and head-and-shoulders patterns in two ways. First, there is no fashioned consolidation at the peak — the turn is instantaneous. Second, the slope symmetry is the defining feature: a steep rise followed by a similarly steep fall. An asymmetric peak (slow rise, fast fall) is a different pattern.

Why it matters

Roofs are the chart-pattern signature of momentum exhaustion at a single bar. They form when a buying climax — short-covering, FOMO buying, breakout-chasing — meets a single decisive supply event (an earnings miss, a downgrade, a news shock, or simply the exhaustion of buyers) at the very top. Because the reversal is instantaneous, there is no second chance to exit at favourable prices. By the time the pattern is identifiable, the right-side decline is already underway.

For active traders, the lesson is defensive: when you see the left side of a roof developing (a near-vertical rise on expanding volume into a known resistance level), pre-set exit orders before the apex prints. For pattern-trackers, the lesson is taxonomic: the inverted-V shape is real and distinct, and treating it as just a "fast head and shoulders" or "sharp double top" loses information.

Why the symmetry matters

The symmetric slopes are not a coincidence. The buying force on the left side and the selling force on the right side are roughly equal in intensity because they often come from the same participants reversing position — momentum traders who bought the breakout cover (sell) into the first sign of weakness, then add shorts. The same population, the same urgency, the same magnitude, but inverted sign.

Key takeaways

Mental model

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Practical application

Spotting a forming roof early

Risk discipline at the apex

Trading the right side

Example

A small-cap biotech runs from $18 to $42 in eleven trading days on rumours of a successful Phase 2 trial. The slope is near-vertical; daily volume climbs from a baseline 300K shares to peaks of 4M shares. On day twelve the rumoured trial results disappoint; the stock opens at $42, briefly touches $43 intraday, then closes at $38.50 on 5M shares.

The next day price gaps down to $35 and closes at $34, breaking the rising trendline drawn from $18. That close confirms the roof.

• A trader who recognised the steep rise as roof-prone had set a stop at $36 (just below the prior session's swing low). The stop fires on day thirteen at $35, capturing most of the move.
• A trader entering a short on the trendline-break close at $34 places a stop at $43.50, targets the prior consolidation around $22, and rides the decline for nine more sessions to $24 — a textbook ~30% gain on a fast pattern.

The full roof structure spans 22 trading days: eleven up, ten or so down, with one-bar apex. The symmetry is the diagnostic. Had the right-side fall taken three months instead of two weeks, the pattern would be a rounding top, not a roof — and the trading playbook would differ accordingly.

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