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The Shark Pattern

Now that we understand how the patterns are traded, we will look at some of the most recently discovered
variations on these patterns. First is the Shark pattern, which is a variation on the traditional M and W shaped
patterns but follows the same general idea in producing trading signals. The Shark pattern is composed of two
separate price segments: A Harmonic impulse wave that fails, and another Harmonic impulse wave that hits
extreme levels. Shark patterns must be actively managed and possess pre-de ned pro t targets once positions
are established. Support and resistance levels are de ned by precise price ratios.

The ideal Shark structure requires price moves that obey the 88.6% retracement parameters and the 113%
reciprocal ratio. The pattern looks to capitalize on the excessive nature of the extreme harmonic impulse wave
(relative to recent averages). In order for the pattern to remain valid, prices must immediately reverse at the
completion point (point C), initiating the new trend. The diagrams for the Shark pattern will look different than
most of the traditional harmonic patterns, because it is an emerging 5-0 pattern that is traded after point C. The
pattern’s D point is actually the pro t target, and is found at the con uence of AB=CD and the 50% Fib retracement
of BC. Since the pattern is traded off of the C point, traders will need to actively manage these positions: The Shark
pattern is not a “set it and forget it” type of structure. The next graphic examples show the needed price levels, rst
as a blank graph and then in real-time charts ( rst bullish, then bearish). Below you can nd the pattern parameters
that de ne the overall structure:

● Drawn from the initial 0 point, price travels to point X in its rst impulse move (this move de nes the needed
price retracements that follow).
● Prices then retrace in a corrective fashion back to point A.
● Prices then extend further in the original impulse direction, to point B. This move will equal 113% to 161.8% of
the initial impulse move.
● Volatility then picks up drastically, as prices reverse to point C. This move will be equal to 88.6% to 113% of the
initial impulse move. This move will also mark 161.8% to 224% of move XA.
● Pro t targets are de ned by the move AB, which can also be found using the 50% Fib retracement of the move
BC.
 
When it comes to harmonics, forex trading has a lot in common with the animal world. After butter ies and crabs,
sharks have come to share their name with famous ve-point patterns used in trading. A relatively new pattern, the
shark was discovered by Scott Carney in 2011, and is very similar to the crab and the Cypher patterns.

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As harmonic pattern trading gains popularity amongst retail and institutional traders, the shark pattern has proved
to be a stellar addition in the harmonic pattern arsenal. Its role in trading is just as decisive and effective as a
shark bite.

Structure of Shark PatternThe pattern was created by combining Fibonacci numbers and the Elliott Wave theory.
The structure of a shark pattern includes an impulse leg (X-A), and a retracement leg (B), where the latter has no
speci c value. The continuation leg (C) must reach a Fibonacci extension of 113% of the B-A leg, but shouldn’t
exceed the 161.8% mark.

Now, a retracement for X-C follows. The shark pattern so obtained must reach an extension of 88.6% of this
retracement, but shouldn’t be more than 113%. The next Fibonacci extension will be B-C, which is an extension of
the A-X leg, within the 161.8-224% range. However, as far as entering trades goes, there is a difference vis-à-vis
other harmonic patterns, for instance:
 
Entry is to be made at an extension of 88.6% of the O-X leg, and the stops will come in at point C
Targets can be at 61.8% of the B-C leg
Now, it is easy to nd the zone to enter trades. This is the area where the X-C Fibonacci retracement and the
B-C Fibonacci extension overlap.
 
Bearish and Bullish Shark PatternsA bearish shark often illustrates entry and exit points. Most real-time samples
won’t have absolutely accurate ratios between OXABC. Another interesting aspect of the shark pattern is its
volatility, which makes it similar to the crab pattern. In a bearish state, shark patterns usually have a long series of
candlestick bodies and long spikes, formed very close to the PRZ level of C. In contrast, a bullish shark pattern
illustrates the volatility created close the PRZ zone of D.

Trading Shark PatternsTo identify a buy signal, con rm point D in a bullish shark harmonic pattern. Now, place the
stop loss at the next Fibonacci retracement level, for instance, 141%. For this order, the take pro t can be placed at
38.2%, 50%, 61.8%, 88.6%, or 100% of the retracements of C.

In case of a sell signal, it can be placed at point C, under the condition that the point reaches an extension of
161.8% of the retracement of point A. For such an order, the stop loss can be tight, with the take pro t being
placed at D.

The cherry on the cake is that this highly tradable pattern gives rise to other patterns and trading possibilities. The
rst is the 5-0 arrangement that everybody knows about, which allows entering a trade in the opposite direction
from the point D. Additionally, in a 5-0 pattern, the shark metamorphoses into a bat, or even a crab, as the BCD
often becomes the XAB of an approaching bat or crab pattern! At this point, one needs to stay watchful and hope
for a C point to be made, which then allows a BAMM trade to be entered.

The shark is truly a complex harmonic pattern, and a lot different compared to other ‘M’ and ‘W’ shaped patterns.
The secret of successfully trading them lies in prioritizing the risk/reward ratio above all.
 

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