The Candlestick Scoop pattern is shown in the following figure. As one can see, it looks like an ice-cream scoop.
The Scoop pattern has two parts to it.
- The handle
- The scoop
- The handle
- The scoop
The handle is the flat part which mostly consists of indecisive trading. One mostly finds Spinning Tops, Doji and small bodied candles in this part. It could also be a very small trading range congestion zone. The bears and the bulls are locked in a fight and this fight can go on for days, or in some cases, weeks. The congestion zone is the area where supply and demand are fairly balanced. Any disturbance on one side is immediately compensated by the other. Then one day, some bulls give up hope that the position will make money. They start selling, casuing prices to go down. However, the lower prices starts attracting new bulls who drive the prices higher. this new surge and interest in the stock, causes more bullish traders to jump in the position, thus creating a scoop type of formation. If the prices can break the congestion zone handle, they can start a new uptrend.
If one notices bearish signals forming as the price approaches the handle area, the scoop pattern might not be able to complete itself and traders need to exit at that point.
The following chart of chart of BearingPoint inc. shows a perfect Scoop pattern. The handle in this case lasted about a month. This period was obviously too long for traders to keep holding the position without any potential gain in sight. The selling was stopped by a Bullish Harami, which attracted new buyers in the stock. This should have immediately alerted a candlestick trader that the possibility exists for a Scoop pattern formation. Notice that there were no indecisive or bearish signals forming as price approached the handle area. This should give the trader the confidence that the Scoop pattern is going to breakout the price.
