Trading Scallops Descending Pattern

Trading Descending Scallop Pattern

The example above illustrates a "Descending Scallop" pattern formation from the XM Satellite (XMSR) daily chart. XMSR formed its first descending "Scallop" in March 2006 as it declined from the peak of $30.50 to a low of $20. In April 2006, XMSR retraced above $24 and started to decline to form another descending "Scallop." The first "Scallop"' height was $10 and the low was at $20.

1. Enter a "short" trade below the low of the Scallop at $20 (level A).

2. Place a "stop" order above the high of the "Inverse J" at $24 (level B).

3. Place a "target" at the height of the "J" shape from level B to $14 (level C).

Chapter 13: Event Patterns

13.1. Gaps

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