Technical Analysis of GBP/USD - Bearish Crab Pattern
Updated
Hello traders,
I would like to do detailed technical analysis of GBP/USD currency pair and the potential presence of a bearish crab pattern. The bearish crab pattern is a harmonic chart pattern used by traders to identify potential reversal (correction) points in the market. Let's examine the key aspects of this pattern in GBP/USD, including the retracement levels and extension ratios.
Bearish Crab Pattern Overview:
The bearish crab pattern is a reversal pattern that typically forms after a strong bullish trend. It consists of four key points: XA, AB, BC, and CD. In the context of GBP/USD, the pattern has the following characteristics:
1. AB retraced XA by 0.598:
The first part of the crab pattern is the AB leg, which retraced the XA leg by 0.598. This retracement level indicates a moderate pullback after a strong initial move.
2. BC retraced AB by 0.799:
The BC leg of the pattern retraced the AB leg by 0.799. This level of retracement is deeper than the typical Fibonacci retracements, suggesting a more substantial correction.
3. CD is an extension of BC by 3.172:
The CD leg is an extension of the BC leg by a ratio of 3.172. This means that the final leg of the pattern extends significantly beyond the BC leg. A 3.172 extension is a common feature of the bearish crab pattern and signals that the reversal is likely to be strong.
4. CD terminates at 1.24285:
The CD leg terminates at the price level of 1.24285. This is a crucial point for traders, as it is where the pattern suggests a potential reversal in the GBP/USD pair.
Technical Analysis and Implications:
The presence of a bearish crab pattern in the GBP/USD currency pair with the described characteristics is a bearish signal. I will be considering the following implications:
1. Reversal Signal: The bearish crab pattern is a reversal/correction pattern, suggesting that the bullish trend in GBP/USD may be losing momentum, and a bearish trend could develop.
2. Resistance Level: The termination point of the CD leg at 1.24285 serves as a significant resistance level which emanated from the rejection of price on the 11th and 12th of October. Having seen a bearish engulfing candlestick pattern at this zone, we anticipate reversal around this price.
3. Stop-Loss and Take-Profit Levels: We are setting 1.24550 as our invalidation zone, while our potential profit areas are 1.22990 and 1.22400 respectively.
4. Confirmation: This pattern is further confirmed by our elliott wave count. The reversal point seems to coincide with the end of impulsive wave 3, confirming that the drop may be a wave 4 correction. And if wave 4, our target should not be big (maybe 1.23006) as the trend is bullish.
Conclusion:
The presence of a bearish crab pattern in the GBP/USD currency pair with the described characteristics suggests a potential reversal (correction) in the bullish trend. We have seen further confirmation using Elliott wave and price action analysis, but remember no trading idea is foolproof hence the need to manage risk properly.
Cheers!!!
Chart to EW Analysis:
I would like to do detailed technical analysis of GBP/USD currency pair and the potential presence of a bearish crab pattern. The bearish crab pattern is a harmonic chart pattern used by traders to identify potential reversal (correction) points in the market. Let's examine the key aspects of this pattern in GBP/USD, including the retracement levels and extension ratios.
Bearish Crab Pattern Overview:
The bearish crab pattern is a reversal pattern that typically forms after a strong bullish trend. It consists of four key points: XA, AB, BC, and CD. In the context of GBP/USD, the pattern has the following characteristics:
1. AB retraced XA by 0.598:
The first part of the crab pattern is the AB leg, which retraced the XA leg by 0.598. This retracement level indicates a moderate pullback after a strong initial move.
2. BC retraced AB by 0.799:
The BC leg of the pattern retraced the AB leg by 0.799. This level of retracement is deeper than the typical Fibonacci retracements, suggesting a more substantial correction.
3. CD is an extension of BC by 3.172:
The CD leg is an extension of the BC leg by a ratio of 3.172. This means that the final leg of the pattern extends significantly beyond the BC leg. A 3.172 extension is a common feature of the bearish crab pattern and signals that the reversal is likely to be strong.
4. CD terminates at 1.24285:
The CD leg terminates at the price level of 1.24285. This is a crucial point for traders, as it is where the pattern suggests a potential reversal in the GBP/USD pair.
Technical Analysis and Implications:
The presence of a bearish crab pattern in the GBP/USD currency pair with the described characteristics is a bearish signal. I will be considering the following implications:
1. Reversal Signal: The bearish crab pattern is a reversal/correction pattern, suggesting that the bullish trend in GBP/USD may be losing momentum, and a bearish trend could develop.
2. Resistance Level: The termination point of the CD leg at 1.24285 serves as a significant resistance level which emanated from the rejection of price on the 11th and 12th of October. Having seen a bearish engulfing candlestick pattern at this zone, we anticipate reversal around this price.
3. Stop-Loss and Take-Profit Levels: We are setting 1.24550 as our invalidation zone, while our potential profit areas are 1.22990 and 1.22400 respectively.
4. Confirmation: This pattern is further confirmed by our elliott wave count. The reversal point seems to coincide with the end of impulsive wave 3, confirming that the drop may be a wave 4 correction. And if wave 4, our target should not be big (maybe 1.23006) as the trend is bullish.
Conclusion:
The presence of a bearish crab pattern in the GBP/USD currency pair with the described characteristics suggests a potential reversal (correction) in the bullish trend. We have seen further confirmation using Elliott wave and price action analysis, but remember no trading idea is foolproof hence the need to manage risk properly.
Cheers!!!
Chart to EW Analysis:
Note
#GBPUSD has now moved +40Pips in the projected direction. CongratsNote
#GBPUSD has move +78pips in the given direction. We may close partials, as we gradually approach the stalling point.Note
First and highest probability Take profit price(1.22990) has been hit at +96Pips Trade closed: target reached
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