AUD/USD Inverted and Ascending ScallopsIn the chart above AUD/USD has formed two Inverted and Ascending Scallops. These chart patterns look like the right side of an umbrella. The price quickly rises, before levelling off near the top in an inverted cup formation. The beauty of these patterns is they perform very well in both bull and bear markets.
Breakeven Failure rate: 9%
Average Rise: 45%
Throwback Rate: 66%
Percentage Meeting Price: 64%
Usually, we would be looking for an upward trend leading to the pattern or at least a bullish turning point of a downward trend. In this case, the 8 days before the formation were downward. But since the end of February 2022, the price trend has been upward. So this may not be exactly ideal.
The currency pair is AUD (Australian Dollar) / USD (US Dollar). This represents how many US Dollars one Australian Dollar will buy. So, for example, the GBP/USD is the British pound to the US Dollar. Currently, it's at 1.32. So if you got one British pound and converted it to US Dollars, you would get 1.32 in return. The main thing to understand here is, the currency pair will be affected by both Australian and US politics. So, even though this trade is on the one hour chart, you will have to watch out for any news coming out of the US and Australia. In my estimate, it may be at least one month before you see any good returns - that is if the pattern breaks out upwards. One month in the currency trading world is a long time. So if you are making this trade, watch out for any news and make sure you have a well-timed stop loss.
Using the Measure rule, we can form an estimate of where the price will go.
In this estimate, I will separate both scallops and then combine them to get three estimates.
Scallop One (The largest and first one on the chart):
From the lowest Valley in the scallop to the highest peak in the pattern, the difference is 0.02404.
The percentage meeting price (64%) X 0.02404 is 0.0153856.
0.0153856 + the price of the highest peak in the pattern is 0.7576156.
This represents a 2.07% rise.
Scallop Two:
From the lowest Valley in the scallop to the highest peak in the pattern, the difference is 0.01589.
The percentage meeting price (64%) X 0.01589 is 0.0101696.
0.0101696 + the price of the highest peak in the pattern is 0.7640196.
This represents a 1.35% rise.
Combining both Scallops:
From the lowest Valley in the scallops to the highest peak in the patterns, the difference is 0.03574.
The percentage meeting price (64%) X 0.03574 is 0.0228736.
0.0228736 + the price of the highest peak in the patterns is 0.7768036.
This represents a 3.03% rise.
To conclude, above are the three price targets you can use for an estimate. The breakout is when the price closes above the highest peak in the pattern. In this case, the first scallop has already broken out upwards successfully. So we will look at the second scallop for a breakout. Also, as the first scallop has broken out already, I would personally only use the second scallop estimate for a price target. Another thing to look out for is heavy breakout volume - as this suggests better performance. For the first scallop, there wasn't heavy breakout volume during the breakout. But, the pattern still performed well. So the heavy breakout volume isn't that important.
