The “Crab” pattern was invented by Scott Carney of Harmonic Trading in 2000. The Crab pattern is another form of the 5-point Gartley extension pattern. The Crab pattern has a distinct extension: 1.62 of XA swing. Crab patterns also have a 0.61 8 XA retracement to form the center retracement “B” level. The Potential Reversal Zone (PRZ) is formed at 1.27 of AB swings, 1.62 of XA and a distinct 2.62 to 3.62 of BC. These extension patterns form when prices trade outside of XA swing. When the price closes below X, the pattern may be signaling a further correction to 1.62 of XA level to form “Crab” pattern.

Trade: Once the Crab pattern is completed at the PRZ level, look for price-action to confirm the reversal. For bullish Crab patterns, look for a “wide range bar” or “higher highs” from the PRZ level to confirm the Crab pattern. Enter a “long” trade above the confirmation bar. For bearish Crab patterns, enter a “short” trade below the low of the confirmation (lower low) bar.

Stop: The bullish Crab pattern fails if prices close below the PRZ levels. Place a “stop” order below the low of the PRZ level. For bearish Crab patterns, place a “stop” order above the high of the PRZ levels.

Target: The bullish Crab patterns result in excellent profits. Set targets at “B”, “C” and “A” levels. Similarly, for the bearish Crab patterns set targets at “B”, “C” and “A” levels.

Trading Crab Bullish Pattern

Trading Crab Bullish Pattern

The above example illustrates a bullish Crab pattern from the S & P 500 index (SPX) daily chart. From September 2005 to October 2005, SPX formed a bullish Crab pattern. Prices traded from a high of 1243 to 1172. In October 2005, SPX completed the Crab pattern as prices reversed to confirm the pattern. A wide-range bar at 1195 level confirmed the price reversals.

  1. Enter a “long” trade above the confirmation bars’ high at 1196.
  2. Place a “stop” order below the low of the Crab pattern at 1171.
  3. Targets are set at “C” level at 1233 and at “A” level at 1243.

Trading Bearish Crab Pattern

Trading Bearish Crab Pattern

The example above illustrates a bearish Crab pattern from Merck’s (MRK) daily chart. MRK ‘ formed a bearish Crab pattern as it rallied from $43 to $53 from February 2007 to May 2007. After completion of the PRZ at “Dm level, a reversal bar from the PRZ confirmed the completion of the Crab pattern. A “short” trade is triggered at the $5 1 level.

  1. Enter a “short” trade below the low of the confirmation bar at $5 1.
  2. Place a “stop” order above the high of the “D” level at $52.75.
  3. Targets are set at “X” level at $47. The second target is set at “B” level at $45.
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