Ascending Scallops Chart Pattern
- Ascending scallops pattern is observed during a bullish rally.
- This pattern appears to be in the shape of J, slightly tilted to it’s right.
- There is a price drop at the start of the pattern. The drop is less and it reverses back, forming a wider bottom.
- After reversal, the price continues to rise further and the whole pattern appears as tilted J.
- There can be a breakout in either direction, i.e., there is a chance of trend reversal and trend continual.
- A breakout above the highest high is considered as an upward breakout whereas a breakout below the pattern’s low is treated as a downward breakout.
- A breakout is necessary to confirm the pattern.
- Compute the height difference between the highest high and the low of the pattern.
- Add the value to the highest peak to get the upward breakout price target. Similarly, subtract the value from the lowest valley to get the downward breakout price target.
- Price often forms another scallop when it peaks towards the right, forming a handle shape. Traders can initiate their long positions at the low of the new scallop. Their stop loss would be little below the bottom of the new scallop.
- If no such handle shape is formed, the stop can be placed below the bottom of the pattern and it can be raised as the price rises.
- If there is a downward breakout, traders can initiate their short position and their target would be the same as the above calculated downward breakout price target.
- As the trend end approaches, the scallops become shorter and narrower.
- Ascending scallops perform the best when they are formed in the middle of the yearly price range.
