It's Shark Week. Almost like a holiday for some folks. In honor of this week and the hysteria over one of God's most efficient apex predators, let's implement Shark Week into our market analysis. And the topic today is over the Shark Harmonic Pattern.
The Shark Pattern is a Gartley harmonic. If you've heard of things like Bat, Butterfly, Cypher, and even Gartley, then your probably familiar with what I'm talking about. The Shark pattern though is relatively new. The idea of harmonic patterns came from one of the 'fathers' of Technical Analysis, H.M. Gartley. In his book, Profits in the Stock Market he details some of his original patterns and the Fibonacci relationships to the construction of those patterns. It wasn't until Larry Pesavento and, most recently, Scott M. Carney, that we found some further development and explanation of this advanced form of Technical Analysis.
The Shark Pattern itself is pretty new (2011) and was found by Scott M. Carney - I really encourage you to check out his stuff, guy is crazy smart. The Shark Pattern has these qualities:
- Precise Fibonacci ratios that define support/resistance.
- Carney stated that this pattern requires active management.
- Dependent on the 0.886 and 1.13 Fibonacci levels at the minimum to be valid.
- Very accurate and strong reactions when completed - especially off the 1.13 Fib zone.
For our cryptocurrency markets, we have a culmination of various Shark patterns showing up on multiple timeframes.
BTCUSD - 1 Day Chart
ETHUSD - 4 Hour Chart
XRPUSD - 1 Hour Chart
There are a couple of ways to use these patterns and a couple ways to trade them. First, we know that price needs to reach either the 0.882 or the 1.13 Fib level for the pattern to be valid - so we would need to assume price will travel lower. Second, we can approach these patterns as becoming invalid. In fact, they don't become valid until price reaches the specific Fib level. If price doesn't reach that Fib level, then the pattern simply fades and it is just another incomplete Gartley pattern (of which, there are many). In fact, we should be extremely bullish if the pattern doesn't play out; because that means prices are moving higher, thereby invalidating the lower Fib levels required. And we can also be bullish if it does play out because the accuracy of this pattern and the violent reversals that pop off this harmonic pattern are extremely strong.