Easy guide to trading the "Quasimodo Pattern"
The Quasimodo Pattern or Over and Under pattern is a relatively new entrant to the field of in the financial markets. Although new, the Quasimodo pattern is a commonly occurring theme that is more frequent when price carves a top or a bottom or when price begins a major correction to the trend.
The Quasimodo Pattern, although complex as it might seem is actually very simple. This trading pattern is especially powerful because when it occurs, in most cases, traders will notice a confluence with other methods of analysis.
For example, when a trader spots a Quasimodo pattern near a support or , it increases the confidence of the trader or the trading probability. Likewise, when trading divergences, when you spot a Quasimodo pattern, that confluence can be used to trade the divergence set up with more confidence.
As we can see from the above, the Quasimodo pattern is not a trading strategy by itself but is more of a confluence pattern that can be used to confirm a trader’s bias. Of course, the Quasimodo pattern doesn’t appear all the time, but when it does, traders can be sure that the market offers a high probability trade set up.
What is the Quasimodo (Over and Under) Pattern?
A Quasimodo Pattern is simply a series of Highs/Lows and Higher or Lower highs or lows.
There should be a prior downtrend in the markets
Price makes new low then makes a small rally and forms a local high
Price then declines to form a new lower low taking out the previous low
Price then rallies to make a new higher high and then declines
The final decline is equal to the first low
The fifth leg in this pattern is the trigger for long positions with stops set to at or below the lower low