As of 08/11/2020
  Indus: 27,687 -104.53 -0.4%  
  Trans: 10,890 +24.59 +0.2%  
  Utils: 822 -19.04 -2.3%  
  Nasdaq: 10,783 -185.54 -1.7%  
  S&P 500: 3,334 -26.78 -0.8%  
YTD
-3.0%  
-0.1%  
-6.5%  
 +20.2%  
 +3.2%  
  Targets    Overview: 07/31/2020  
  Up arrow28,150 or 25,000 by 08/15/2020
  Up arrow11,100 or 10,050 by 09/01/2020
  Up arrow870 or 800 by 08/15/2020
  Up arrow11,300 or 10,200 by 08/15/2020
  Up arrow3,500 or 3,250 by 09/01/2020
CPI (updated daily): Arrows on 6/29/20
As of 08/11/2020
  Indus: 27,687 -104.53 -0.4%  
  Trans: 10,890 +24.59 +0.2%  
  Utils: 822 -19.04 -2.3%  
  Nasdaq: 10,783 -185.54 -1.7%  
  S&P 500: 3,334 -26.78 -0.8%  
YTD
-3.0%  
-0.1%  
-6.5%  
 +20.2%  
 +3.2%  
  Targets    Overview: 07/31/2020  
  Up arrow28,150 or 25,000 by 08/15/2020
  Up arrow11,100 or 10,050 by 09/01/2020
  Up arrow870 or 800 by 08/15/2020
  Up arrow11,300 or 10,200 by 08/15/2020
  Up arrow3,500 or 3,250 by 09/01/2020
CPI (updated daily): Arrows on 6/29/20

Bulkowski on the Bearish Crab Pattern®

 

Initial release: 8/8/2018. Statistics updated on 4/6/20.

Bearish Crab: Overview

This article describes my analysis of the bearish crab pattern as described by publicly available information and common sense rules to determine valid patterns. Additional rules may or may not improve performance. I tested the pattern using only the below identification guidelines.

The bearish crab loosely resembles a double bottom chart pattern except that the turns are located using Fibonacci ratios. It's a rare pattern.

The breakout direction is upward 84% of the time, so that suggests the pattern isn't bearish at all. However, that preponderance of upward breakouts is misleading.

Because the pattern ends near its high, it's easy for price to close above the top of the pattern (compared to closing below the bottom of it). A close above the top of the pattern, an upward breakout, means it's bullish, by definition. So expect an upward breakout.

The crab pattern
Bearish Crab

 

Bearish Crab: Important Bull Market Results

Overall performance rank for up/down breakouts (1 is best): 18 out of 48/9 out of 46
Break even failure rate (up/down breakouts): 12%/18%
Average rise/decline: 44%/16%
Throwback/pullback rate: 64%/65%
Percentage meeting price target (up/down breakouts): *53%/*20%

The above numbers are based on almost 1,400 perfect trades with upward or downward breakouts in a bull market. See the glossary for definitions.

* I used the height of the pattern to determine a target after a breakout.

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Bearish Crab: Identification Guidelines

For the associated ratios, consult the figure to the right of the table.

 Characteristic Discussion crab retraces
Bearish Crab Ratios
Peaks/ValleysThe peaks and valleys in the pattern need not be consecutive. This is not a guideline, but an observation.
XABPrice climbs to peak at X, the first point in the pattern. It drops from there to valley A and rises to peak B. The BA/XA retrace is one of the three ratios shown.
ABCTurn ABC shows a BC/BA retrace of one of six Fibonacci ratios.
BCDExtension DC/BC is one of three Fibonacci ratios.
DAXRetrace DA/XA is 161.8%.

Because of the many ratios used, especially the 161.8% DA/XA retrace, the pattern is rare. I found 1,357 in a bull market, and of those, 220 had downward breakouts.

You'll need a computer with software to find the pattern.

Find five peaks/valleys (turns) where the ratio of one leg to another is one of the Fibonacci numbers listed in the figure. However, I used a 3 percentage point window on the last ratio (161.8% becomes 158.8% to 164.8%) to keep the sample count high.

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Bearish Crab: Trading Tips

I don't offer much trading help because I'm new to this pattern.

My tests show that the pattern breaks out upward 84% of the time. What does that mean? A close above the top of the pattern (above peak D) means an upward breakout.

Price may dip after point D, in fact it's likely that it does so (75% do), but the drop usually doesn't amount to much (14% average which isn't bad for a swing trade). Twenty percent of chart patterns see price decline less than 5% below D.

You may have better luck with the pattern if overhead resistance matches or is near the XD peaks. Think of this as a ceiling which takes some pushing to break through.

I did not test or examine the pattern for this behavior.

Bearish Crab: Example

An example crab pattern

The figure above shows an example of a bearish crab pattern that isn't very bearish. The pattern begins at X and ends at D.

You might complain that X isn't a turning point, but it's a minor high, the highest peak in five price bars, so it's acceptable.

Notice that the stock dips after D, but then recovers and breaks out at E (the first close above the green line, setup by the high at D).

Here are the high/low prices of the various turns

X: 127.80 - 126.26
A: 116.12 - 113.57
B: 121.57 - 119.82
C: 118.49 - 115.74
D: 136.24 - 133.01

Here are the ratios.

BA/XA = (121.57-113.57)/(127.80-113.57) or 56% (using the high at B). Using the low at B gives: (119.82-113.57)/(127.80-113.57) or 44%. This means the high-low range of B encompasses the 50% Fibonacci ratio.

BC/BA = (121.57-115.74)/(121.57-113.57) or 73% (using the low at C). Using the high at C gives (121.57-118.49)/(121.57-113.57) or 38.5%, which is almost exactly the 38.2% ratio.

DC/BC = (136.24-115.74)/(121.57-115.74) or 352%. Using the low at D gives (133.01-115.74)/(121.57-115.74) or 296%. The 352% to 296% range encompasses the target 314% value, so it qualifies.

DA/XA = (136.24-113.57)/(127.80-113.57) or 159% which is within three percentage points of 161.8%, so it's allowed.

-- Thomas Bulkowski

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See Also

 

Support this site! Clicking any of the books (below) takes you to Amazon.com. If you buy ANYTHING while there, they pay for the referral.

My novels:  Bumper's Story Head's Law

Chart Patterns: After the Buy Getting Started in Chart Patterns, Second Edition Trading Basics Fundamental Analysis and Position Trading Swing and Day Trading Visual Guide to Chart Patterns Encyclopedia of Candlestick Charts Encyclopedia of Chart Patterns 2nd Edition Trading Classic Chart Patterns

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