“Crown” patterns are a variation of skewed “Head and Shoulders” patterns, and they incorporate Fibonacci ratios in its formation. “Crown” patterns form at the end of market rallies or market declines suggesting a major trend change. As the name suggests, “Crown” patterns look like a series of “spikes” formed with Fibonacci ratios compared to prior swings.

“Crown” patterns form in all markets and in all time-frames. They are moderately reliable, but need confirmation to trade. Occasionally, “Crown” patterns form multiple spikes like “Zigzag” in a short span of time before the pattern really emerges out of the channel.

Trade: “Crown” patterns have similar trading opportunities as “Head and Shoulders” patterns with few Fibonacci based rules. In bearish “Crown” patterns, trade setup is made below the low of the recent “swing low” and a “stop” placement is set above the recent “swing high.” In bullish “Crown” patterns, trade setup is made above the high of the recent “swing high.”

Stop: For short trades, if the market rally takes above the high of the pattern, the “Crown” will fail. Place an order 2 ticks above the “swing high” of the pattern. For long trades, reverse the previous criteria.

Target: The “Crown” patterns are profitable and can be trailed with a 2-bar high for “short” trades and a 2-bar low for “long” trades. Set profit targets at major “swing lows” and major “swing highs.”

Trading Crown (Bearish) Pattern

Trading Bearish Crown Pattern

The example above illustrates a “Crown” pattern from the Russell 2000 EMini futures chart. On April 04,2007, during the morning session, ER2 traded higher and formed a “Crown” pattern based on Fibonacci ratios. The pattern continued its down trend after trading below recent “swing low” at 817. After a series of spikes, a “short” signal was triggered below the first “swing low” at “D” level.

  1. Enter a “short” trade below the low at “D” level (8 17).
  2. Place a “stop” order above the “E” level at 8 18.7
  3. Target a major “swing low” prior to the “Crown” pattern formation at “B” level.

Trading Crown (Bullish) Pattern

Trading Crown (Bullish) Pattern

The example above illustrates a “Bullish” crown pattern from the Nasdaq futures (NQ) weekly chart. NQ made series of Fibonacci based swings to form a “Crown” pattern. The swing BC is 1.27 of AB and CD is 1.27 of BC and DE is 0.618 of BC. After series of spikes, look for a trend reversal to close above the first “swing high” at B.

  1. Enter a “long” trade above level “B.”
  2. Place a “stop” order below the low of recent “swing low” at E.
  3. Target a “major swing high” prior to the “crown” pattern formation.