Scallops Chart Pattern Complete Guide For Profitable Trading
Scallops Chart Pattern are J-shaped, inverted J-shaped, or mirror J-shaped continuation patterns that appear often during trending markets. This pattern has a steep momentum and a rounded bottom or top. The structure is pretty smooth at first, then the market begins to rush up with significant momentum, or vice versa. Scallop patterns appear less frequently than other continuation patterns such as flags or pennants, yet they are among the most stable forms.
Table of Contents
Types of Scallops Chart Patterns
There are four types of Scallops, two of which suggest bullish movement, while the other two imply bearish movement.
- Ascending Scallop Pattern
- Inverted Ascending Scallop Pattern
- Descending Scallop Pattern
- Inverted Descending Scallop Pattern
Ascending Scallop Pattern
The pattern is observed during a market rise. The shape appears to be a ‘J’ with a small slant to the right side.
How to Identify?
It is most typically noticed in an ascending trend.
The initial movement would be a short downward curve (A to B), followed by a steep up (B to C).
The curve retracement (B) often retraces 50 to 70 percent of the previous move up. The smaller the retracement, the better.
To initiate a buy entry, traders would aim for the price to break the recent high of the scallop level (A).
Ascending Scallop Pattern Trading Strategy
The Ascending Scallop Pattern is regarded as legitimate after the price is able to break through the pattern’s recent higher peak (A).
When the price closes above the pattern (A), a trader would enter a buy position.
Another option to place a buy entry is to wait for the price to retest the broken level (A) following the breakthrough.
Price targets would be determined by calculating the distance between the scallop pattern’s high (A) and low (B) points.
Stop loss order should be positioned between the pattern’s middle or the pattern’s remote boundary (B).
Inverted Ascending Scallop Pattern
This pattern can be seen during a bullish surge. The form resembles an inverted ‘J’ letter, with a sharp line ascending, followed by a small curve decline.
How to Identify?
A strong initial move is required (A to B), followed by a rounding shape (B to C) to the top of the pattern.
The pattern should be longer and narrower.
After forming the higher high (B), the price retracement (C) would be roughly 50 to 60 percent of the previous move (A). The lesser the retreat, the better the pattern usually works out.
A buy entry would be placed if the pattern’s high (B) got broken.
Trading Strategy
A buy entry for Inverted Ascending Scallops would be placed when the price closes above the pattern’s top (B).
If the price retraces and tests the broken resistance level (B), a conservative long entry would be placed.
The trade’s price target would equal the pattern’s height from top to bottom (B to C).
Stop loss order should be set below the scallop’s edge (C). A price drop below the scallop’s edge renders the pattern invalid.
Descending Scallop Pattern
The Descending Scallop formation resembles a mirror version of the letter ‘J’. During a down-trending market, this pattern is noticeable.
How to Identify?
The pattern is visible in a declining trend.
The first movement would be a sharp descent (A to B), followed by a slight retracement with a curve (B to C).
The curve retraces roughly 50 to 60 percent of its previous downward move.
A breakout of the recent lower low of the scallop level (B) would be used as an entry point for short selling.
Descending Scallop Pattern Trading Strategy
The breakthrough of the recent lower low (B) confirms the descending scallop pattern formation.
When the price closes below the pattern, a short selling entry would be placed.
Traders might also wait for the price to retest the broken support level (B) following the breakout for a more conservative entry.
The distance between the scallop pattern’s peak and low (B and C) can be utilized as a price target.
Stop loss orders should be set between the pattern’s midpoint or at the pattern’s peak (C).
Inverted Descending Scallop Pattern
This pattern also appears during the bearish trend. The shape is almost inverted to the descending scallop pattern.
How to Identify?
It occurs during a bearish reversal.
The price rises at the start of the pattern (A), reach a high (B), and then begins to fall.
A round top is formed as the pattern gradually rises. Later, the price level falls drastically, validating the pattern’s formation.
The pattern is confirmed when the price closes below the low of pattern (A).
Trading Strategy
Traders can initiate short positions in the market when the price close below the pattern’s low (A).
Another entry would be placed after the pullback and retest of the broken level (A).
The height of the scallop pattern (A to B) would be used to determine the price objective.
Stop loss order should be placed at the middle or top of the pattern (B).
Scallops – Identification Guideline Table
| Type | Trend | Characteristics | Trade |
| Ascending Scallop | Uptrend | ‘J’ Pattern | When the price closes over the scallop’s high, place a buy order |
| Inverted Ascending Scallop | Uptrend | Inverted and Backward ‘J’ shape | Place a buy order when the price closes over the scallop’s top |
| Descending Scallop | Downtrend | Mirror ‘J’ | When the price closes below the scallops’ low, place a sell order |
| Inverted Descending Scallop | Downtrend | Inverted ‘J’ shape | Place a sell order when the price falls below the scallop’s low |
Key Takeaways
- The pattern appears to be ineffective in the short time frame due to potential nose, but it performs better in high time frames.
- The structure is comprised of a smooth curve with a steep momentum and vice versa.
- On ascending scallops, we would wait for the price to breach the peak of the scallop level before entering the market.
- Descending scallops have a similar appearance to ascending scallops. The sole distinction is that it is used the enter short positions when the price breaks through the scallop low level.
- This pattern should be traded on time periods such as 4h, daily or weekly.
- Heikin Ashi candlestick chart helps you identify the scallop patterns more precisely and filter out the market noise.
- Aligning the scallops with other technical tools like moving average, candlesticks, and Fib retracements provides traders with a high confluence setup.
- And lastly, use proper risk management to limit losses.
Visit bulkowski scallops trading statistics to view trading statistics for the scallop chart pattern.
FAQ
What is scallops pattern?
Scallops Chart Pattern are J-shaped, inverted J-shaped, or mirror J-shaped continuation patterns that appear often during trending markets.
What is ascending scallop pattern?
The pattern is observed during a market rise. The shape appears to be a ‘J’ with a small slant to the right side.
How do you trade descending scallops?
When the price closes below the pattern, a short selling entry would be placed.
At Bulls Arena Trading
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New Delhi
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