Crab Claw
The CRAB CLAW is a chart pattern frequently signaling a top and shorting opportunity.
The move starts with a peak (local high) followed by a small retracement and another peak matching or taking out the previous one. It’s called a Crab Claw because the first peak (thumb) is followed by a small base and a second peak (the fingers) right before it cracks and moves to the downside. Feel free to hold your hand up like a U to visualize the pattern.
This pattern can form quite often so you have to be diligent about your entries. First, it’s best used when the new local highs (peaks) are pushing past higher time frame (HTF) local highs, such as a previous high-of-day or a daily resistance level. Second, you want to wait for a strong bearish drop after the second peak of the Crab Claw to confirm the shift in direction. Price should at least fall below the Crab Claw base to form a new lower low for the setup to be valid. Without making a new lower low, the trend could still be intact and continue to the upside.
After a sizable drop or correction from the 2nd peak, you’ll look for a Supply Zone or a Fair Value Gap (FVG) formed during the drop. Price will frequently loop back around to retest that zone/gap before continuing its downtrend, which presents an ideal entry point. Sometimes retracements can occur quite quickly, other times they can take several hours, so be patient and always be prepared for a quick move back up even if price seems like it isn’t coming back. .
Your entries for this strategy can be anywhere within the Supply Zone or FVG. The likelihood of an entry is obviously higher if you choose to enter at the low end of the zone/gap, but use your best judgment to decide exactly where to place it.
Your stop-loss for this strategy should be just beyond the highest peak. If price moves past these peaks to make a higher high, the trade is invalidated.
Your take profit for this strategy should be right before the nearest sell-side liquidity or range low. You can use these levels as opportunities to take partials and attempt to ride the trade as far as it can go, but that is per your discretion.
Valid Crab Claw Entry Checklist:
1. The peaks are pushing past a HTF high
2. The drop after Peak #2 moves below the Crab Claw base (forms a lower low)
3. A Supply Zone or FVG is formed during the drop from Peak #2