One pattern that traders love is the crab pattern. If you want to know how to trade crab pattern and bearish deep crab pattern, please read on …
What Is a Crab Pattern?
Like other harmonic patterns, the crab pattern is a popular 4-leg reversal pattern. This harmonic pattern was derived from the Gartley pattern. In fact, a unique thing about the crab pattern is its long CD and XA swings.
But what separates it from the other patterns is point D which is beyond point X.
What Is a Bearish Crab Pattern?
Like all patterns, the crab harmonic pattern does help you predict a change in the market trend. The bearish crab pattern will help you detect when a bullish market is about to end while ensuring that you enter positions at extreme highs and lows.
This pattern becomes explosive as soon as point D forms. In fact, you should expect a trend reversal with the potential for a huge ROI. So when trading a bearish crab pattern, you should enter between 2.24 and 3.618.
For maximum results, you should sell as soon as it hits 2.24.
How to Identify this type of Bearish Harmonic Pattern?
Identifying this type of bearish harmonic pattern is relatively easy; remember, it resembles the butterfly pattern. It is “W-shaped” and starts with the wave dropping from X to A, but it has to respect the bearish crab pattern rules. Some of these rules include the following:
- B should retrace between 38.2% and 61.8% of the XA wave.
- After reaching point B, it will drop to point C, which is between 38.2% and 88.6% of AB.
- From C, it will move upwards to point D to creating bearish pattern. Point D lies between 224% and 316% of AB or 161.8% of XA.
Example of Bearish Crab Pattern
The chart below shows a great example of a Bearish Crab Pattern using our Automated Harmonic Pattern Recognition Software available for many trading platforms. The Chart highlights typical behaviour of this pattern when using it for Stocks Trading. The Crab Pattern completes in our Automated completion zone, so the Short trade has great potential. The initial move down is stron, then the price pulls back to test the previous D pivot price and forms a triple top before really taking hold to the downside. This retesting behaviour is typical with stocks and this type of Harmonic Crab Pattern.