Shark and 5-0 Patterns
Shark and 5-0 patterns were developed by Scot Carney. Shark is 5-0 pattern without the last leg with additional constrains. The patterns are relatively new, but becoming more popular lately. The pattern stands out from the ranks of the other harmonic patterns because it is intended to start a new trend rather than identify retracement. There are 2 versions of the pattern bullish and bearish. Below are the schematic pictures of the Bullish and Bearish 5-0 patterns:
The pattern starts with uptrend or downtrend which comes to exhaustion and draws zigzag like corrective movements. The characteristics of the 5-0 pattern to look at:
- AB movement should be 1.13 to 1.618 retracement of XA.
- BC movement should be 1.618 to 2.24 retracement of an AB.
- CD movement should be 0.5 retracement of BC
- For a proper Shark pattern C should be between 0.886 and 1.13 of 0X movement. (0 being the point before X)
If the Shark condition satisfied, some traders trade the last leg of CD, entering at C with stop below 2.24 of AB retracement and aiming at 50% correction of BC movement.
5-0 Pattern is traded when the price is approaching point D. The stop is placed few ticks below/above the farthest possible D level. Unlike most of the other patterns 5-0 does not have defined targets because usually it starts a new trend and the pattern fib ratios do not matter much. Entries might be done with a limit order or on price reversal away from D. All entries must be tested for risk/reward ratio. Entries with low risk/reward has to be taken cautiously or discarded altogether.
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