07 Dec 10 - Bearish Deep Crab Pattern on AUD/USD - H1 Chart

I would consider this trade an interesting one when it comes to the decision making part as to whether to take the trade or not.

Prior to the trade execution, the following thought process occurred:

A check with the D1 chart showed that there was a price rejection at 0.99351 region which was the 0.618 Fibonacci Retracement level which gave me a selling bias. Primary trend in this case is a down trend which is currently experiencing an upward retracement, i.e. correction.

Having decided on my trade position for the day, there was a dilemma now, there were 2 potential patterns forming, the first was a Bearish Crab Pattern which employs a 0.618 XA retracement (note: a Gartley Pattern also has a 0.618 XA retracement) and the other was a smaller pattern which was the Bearish Deep Crab Pattern which is characteristic of a 0.886 XA retracement.

Since both patterns were quite nicely projected, I decided to project both patterns out and observe the price action at the PRZ.

As it turned out, the price action revealed a Bearish Deep Crab in play. The chart attached above showed that price was not able to rally to the Bearish Crab Pattern and respected the Bearish Deep Crab Pattern's PRZ (attached below) instead.

It should be noted that trading is a calculated risk where we trade on a high probability, low risk setup but that does not mean that losses will not be experienced though.

The following validated the Bearish Deep Crab Pattern:

1. 0.886 XA retracement which pointed to a Bearish Deep Crab Pattern.
2. A confluence of 3 Harmonic Ratios - 1.618 XA @ 0.99513, 1.27 AB=CD @ 0.99475 and 2.24 BC @ 0.99545.
3. Signal to go short was when price closed below the PRZ.

Trade Details

• Date: 07 Dec 10
• Time: GMT 11:16
• Entry Price: 0.99498
• S/L: 0.99800 (30.2 pips)
• T/P: 0.98610 (88.8 pips) - 0.886 AD Swing

Trade Progress

The 1st batch was closed on 07 Dec 10, GMT 14:52 at 0.99208, netting a profit of 29 pips which the 2nd batch was closed when the T/P was triggered on 08 Dec 10, GMT 13:18, netting a profit of 88.8 pips.

Reflection

This is a nice trade done and some discretion was made here on the T/P. Since the trade was done in the direction of the primary trend, I decided to target at a more ambitious price objective.