The shakeout pattern is quite unfamiliar to traders, and even to some brothers, this is the first time we heard of this pattern. However, it is a meaningful model, and behind it is a good story to tell. Let's see what model it is.

The shakeout pattern is actually a variation of some other pattern. At the top, it shows a redistribution of the market. On the contrary, at the bottom, it is an accumulation of large cash flows before going up further.

Here is the top Shakeout pattern:

As you can see this model is divided into 3 phases. Not even one without. In order for the model to be true in its own right, three stages are required.

The first stage is the price push stage. At this stage, the price is pushed up quite high and quite steep. Of course, it is still in an uptrend and leaves the trader with a lot of FOMO because the price is very nice.

The second stage drops suddenly. After a period of strong increase, then suddenly the price fell suddenly, straight one 90 degrees line could not turn back, causing FOMO traders to buy heavy goods at the top.

Third-period prices stop falling and move sideways for a while before falling further. This was the most engaging period, and the one with the most stories. At this stage, the price stops falling and slightly increases, making the buyers believe that the price will only pullback in the uptrend but buy more, the traders who are clamped at the top are also less worried about buying more. Since then, the large cash flow has the opportunity to match all pending orders at the top.

This is the shakeout period, so it will be unpredictable. Usually, during this period, the price will form a small reversal pattern such as a head and shoulders or two peaks or a flag pattern with a false breakout in order to eliminate traders from both directions.

Specifically, in the head and shoulders pattern at this third stage, the traders entering the Sell order will be rejected when the price makes a false breakout when the Head in the Head and Shoulder Pattern is formed. Traders who enter Buy orders die without any argument.

After the distribution is complete, the price will cross the neckline and officially reverse downward.
Note that, with a typical pattern, there is only 1 shakeout but in reality, the pattern may appear to be up to 2 shakeouts, which is normal.

Let's see the actual example:

In this example, it is clear that the price is redistributed twice by two head and shoulders patterns in the third period. Thanks to this model, we know what to do with the market, right?
The bottom shakeout pattern is similar to the top shakeout:
The third stage of this model, instead of distribution, is called accumulation. There will also be a Head and Shoulders pattern or an accumulating checkerboard pattern in the third phase before a strong advance. Here is an example: