Scallops Pattern

"Scallops" are J-shaped patterns that form in ascending and descending markets. In ascending "Scallop" (Bullish) formations, the pattern resembles a "J" letter and has a rounded bottom with a steep ascent. In descending "Scallop" (Bearish) formations, the pattern looks like a "Mirror Image of J." Usually the volume between the top peak and the bottom "J" peak resembles a "U" shape formation. In ascending and descending "Scallop" formations, the higher "Scallop" size or lower "Scallop" size becomes smaller as they progress. "Scallop" patterns are relatively easy patterns to trade and have a moderate success rate compared to the "flags" or other continuation patterns.

Trade: Descending Scallop patterns are visible once the bottom part is made and the price starts to rise. Also, descending "Scallops" are potential short trades once prices trade below the low of the "curved bottom." In ascending "Scallops," after the first "J" Scallop formation, a retracement is needed for another "J" Scallop. Depending on the market strengths, the retracement is from 38% to 62%, and hence the failure rate in ascending patterns is relatively higher than descending "Scallops."

Stop: In descending "Scallops," the trade is initiated below the low of the pattern. If the prices rise back above the right side of the "J" peak, then the pattern is considered as a failure. In ascending patterns, a "stop" is placed below the low of the "J" pattern.

Target: Targets are usually at the height of the "J" pattern from trade entry. For ascending patterns, the height of the "J" shape is added to the entry. In descending patterns, the height of the "J" shape is subtracted form the entry.

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