What to do when a Bat/Gartley pattern fails? One option is that we will wait for the Crab pattern. It doesn’t mean that Crab pattern only works when Bat/Gartley fails. Both can work as long as the ratio alignment is still intact. Rules of Crab pattern: • B point that is a 0.618 retracement of XA or less. • Extreme BC projection that is typically a 2.618, 3.14, or 3.618. • Alternate 1.27 or 1.618 AB=CD. • 1.618 XA projection as the defining limit with the structure. • C point with range between 0.382 and 0.886 3 elements define the PRZ:
- 1.618 XA projection (the most important)
- Extreme BC projection
- Alternate AB=CD- In the Crab, usually we ignore this element as CD= 1.618AB is still too far from 1.618 XA projection.
1. Bullish crab pattern
Figure 1 is one of the most beautiful Crab patterns. The PRZ even collides with the PRZ of another Bat pattern (not shown). 3.618 BC projection and 1.618 XA projection clearly define the PRZ. The price tests this area, create a double bottom and rally convincingly, which offers many opportunity to get entry. It is important to wait for at least the most important element of PRZ being tested, or even whole PRZ being tested.
Patience is key! Again, the price reversed right above the PRZ, which made us think for a second that we missed the trade already. However, the magnet effect of harmonic pattern speaks, the Price comes in to test the PRZ and marks a new low for the pattern. 3.14 BC and 1.618 XA Projection pinpoint the reversal in trend precisely.
2. Bearish crab pattern
This chart is the same as the example in Bearish Gartley pattern. Point B retraces 61.8% XA. The price rallies and breaks through the PRZ of Gartley pattern. 2.618 BC and 1.618 XA create a nice PRZ. Although the bull is strong, cutting through the PRZ with a long blue candle, it is quickly rejected back to the PRZ and gives us an opportunity to sell.
The Nasdaq 100 also possesses similar characteristics. A failed Gartley with point B at 61.8% XA retracement. 3.618 BC and 1.618 XA create a compact zone for the Crab. The price comes in, stabilizes and get rejected decisively. However, it only provides a temporary resistance. *Note: the price action in Crab’s PRZ is usually very sharp and volatile. Execution of this pattern requires experience and carefulness. To see more examples, have a look at our collection here!