Bullish Shark
The conditions to form a Bullish Shark pattern are given by the Fibonacci retracement levels between the four legs of the pattern:
- BC is a retracement in the range of 1.13 – 1.618 of the second leg AB
- CD will be a retracement between the range 1.618 – 2.24 below B
- CD retracement will fall between 0.886 – 1.13 retracement level of the original impulse origin X
Bearish Shark
The opposite scenario forms a Bearish Shark pattern defining a potential entry to a sell position at completion D:
- BC is a retracement in the range of 1.13 – 1.618 of the second leg AB
- CD will be a retracement between the range 1.618 – 2.24 above B
- CD retracement will fall at 0.886 – 1.13 retracement level of the original impulse origin X
Shark Pattern Identification with PatternSurfer
On arrival of a Shark pattern, PatternSurfer will display all coordinates, including the Actual Pattern Completion Price (D) as per the market prices, as well as the Ideal Pattern Completion Price (an exact D as per the strict Fibonacci ratio). D defines the entry point for the Shark pattern.
If the position of D is 0.886 (retraced less than the level of X), X can be kept as a conservative stop loss for a high risk-reward trade. If the position of D is beyond X (1.13 retracement level), a suitable stop loss would be of 20% of XA.
With PatternSurfer, users are also able to identify the formation of a Shark pattern before point D is reached. This is called an “Approaching” pattern, and traders will be made aware of the expected (Ideal) Completion Price, and the current Actual Completion Price which is approaching the Ideal D.