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Thomas Bulkowski’s successful investment activities allowed him to retire at age 36. He is an internationally known author and trader with 30+ years of stock market experience and widely regarded as a leading expert on chart patterns. He may be reached at

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Bearish Crab®

Class Elliott Wave Fundamentals Psychology Quiz Research Setups Software Tutorials More...
Busted
Patterns
Candles Chart
Patterns
Event
Patterns
Small Patterns
Market
Industrials (^DJI):
Transports (^DJT):
Utilities (^DJU):
Nasdaq (^IXIC):
S&P500 (^GSPC):
As of 12/14/2018
24,101 -496.87 -2.0%
9,514 -158.63 -1.6%
758 -1.70 -0.2%
6,911 -159.67 -2.3%
2,600 -50.59 -1.9%
YTD
-2.5%
-10.3%
4.8%
0.1%
-2.8%
Tom's Targets    Overview: 12/14/2018
25,000 or 23,500 by 01/01/2019
10,100 or 9,000 by 01/01/2019
740 or 775 by 01/01/2019
7,300 or 6,700 by 01/01/2019
2,700 or 2,525 by 01/01/2019

Written by and copyright © 2005-2018 by Thomas N. Bulkowski. All rights reserved. Disclaimer: You alone are responsible for your investment decisions. See Privacy/Disclaimer for more information. Some pattern names are the registered trademarks of their respective owners.

Initial release: 8/8/2018

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

 

Important Bull Market Results

Overall performance rank (1 is best): Not ranked
Break even failure rate (up/down breakouts): 13%/19%
Average rise/decline: 44%/18%
Throwback/pullback rate: 61%/68%
Percentage meeting price target (up/down breakouts): *56%/*29%

The above numbers are based on 560 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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Identification Guidelines

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

 Characteristic Discussion
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 560 in a bull market, and of those, 90 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.

crab retraces
Bearish Crab Ratios

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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 (73% do), but the drop usually doesn't amount to much (9% median, 13% average). Twenty-seven 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.

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

Crab is a registered trademark of Scott Carney.

Written by and copyright © 2005-2018 by Thomas N. Bulkowski. All rights reserved. Disclaimer: You alone are responsible for your investment decisions. See Privacy/Disclaimer for more information. Some pattern names are the registered trademarks of their respective owners. A man without religion is like a fish without a bicycle.