Toby Crabel’s Bull Hook Trading Strategy Tested | Ali Casey

As an algo trader, I value patterns for their ease of programming and testing, which allows for the development of robust trading strategies. Today, we'll explore bull and bear hooks, patterns that can vary in details but generally serve to catch traders on the wrong side. Toby Crabel, Joe Ross, and Thomas Bulkowski, among others, have variations of these patterns.

Toby Crabel's original definition of the Bull Hook pattern:

» A Bull Hook occurs on Day 2. A Bull Hook is defined as a day with a higher open than the 

previous day's high followed by a lower close with a narrowing daily range. The next day (Day 1), 

a trade is taken on the initial move off the open, preferably to the upside. «

 

Toby Crabel's original definition of the Bear Hook pattern:

  » Bear Hook is a day in which the open is below the previous day's low and the close 

is above the previous day's close with a narrow range relative to the previous day. As implied by 

the name there is a tendency for the price action following a Bear Hook to move to the downside. «

The Bull Hook pattern has two main forms:

Bull Hook 1: In a downtrend, the pattern is identified when today's bar is an up bar with a smaller range than the previous day and is an inside day (high lower, low higher than the previous bar). We buy with a stop order above the high of this bar.
Bull Hook 2: Here, today's bar is a down bar with a smaller range than the previous day, opening above the previous high and closing below the previous close. This pattern involves just two bars.

For testing, I used TradeStation with S&P 500 e-mini futures data. The backtest for Bull Hook 1 was disappointing, showing a loss with only 15 trades, which seemed unusual given its pullback nature. A deeper analysis suggested that the specific conditions, particularly the inside day and green bar requirements, were limiting trades. By removing some conditions, like the inside day and green bar, and focusing on a simpler pullback strategy, the results improved significantly with about 200 trades and positive performance metrics. For Bull Hook 2, the test also yielded fewer trades than expected, which might be attributed to its breakout nature, not performing well on the S&P 500. Simplifying the conditions here also improved the results somewhat, though it remained less effective. The Bear Hook pattern, when flipped for long trades, performed better but still had a low trade count. Removing some conditions and simplifying it increased the trade count and improved performance. While both Bull Hook patterns had potential, their effectiveness was highly dependent on specific conditions and the number of trades generated. Simplifying the patterns often led to better results.

Reference:
Ali Casey (July 28, 2024) - The Secrets of Toby Crabel’s Bull Hook Trading Strategy Exposed. (video)
 Toby Crabel (1990) - Day Trading With Short Term Price Patterns And Opening Range Breakout.
MyPivots.com (2024) - Scanner for Toby Crabel Price Patterns in the E-mini S&P 500 Futures. 

 

See also:

Thomas Bulkowski (2013) - Hook Reversal, Uptrend.

 Thomas Bulkowski (2013) - Hook Reversal, Downtrend.

Joe Ross (1991) - Trading the Ross Hook.

Slava Loza (2021) - How to Trade the 1-2-3 Reversal and the Ross Hook Patterns.

Thomas Bulkowski on Hook Reversals in an Uptrend and in a Downtrend.

A Sophisticated Look at Pivot Points | John Seckinger

The following is based on an SFO article published in December 2004 by John Seckinger, titled, "Take a Two-Dimensional Approach: A Sophisticated Look at Pivot Points." He offers these tips:

■    Don't look at the range of S2 to R2 as support and resistance levels. Rather, consider them oversold (S) and 

       overbought (R) areas.
■    S2 to R2 range of values across daily, weekly, and monthly periods: If two values are close together then they 

       lend more significance to the area.
■    If the market trends on day 1, the odds rise tremendously that the market will be range bound between daily

       S1 and daily R1 the next day.
■    In a quiet market when traders are waiting for an important earnings announcement or economic report, 

       look for daily R1 and S1 levels to hold and for the market to return to the daily pivot.
■    A move outside of daily R1 or S1 usually does not mean a breakout.
■    The odds suggest that the entire week's price action will remain between weekly R2 and S2.
■    Avoid going long when the market moves above weekly R2 (it's overbought) 

       and avoid going short when price moves below weekly S2 (oversold).
■    Consider going short at weekly R1 or long at weekly S1 with a profit objective of the weekly pivot.
■    Consider going long at weekly S2 or short at weekly R2 with a profit objective of weekly S1 or R1,  respectively.

 

   —  John Seckinger

Daily, Weekly, and Monthly Floor Trader Pivot Points for the Week of September 9, 2024:

 

 » There often will be confluences when comparing the weekly and daily S2 to R2 levels 

that increase this area’s significance. «   —  John Seckinger

Here are the formulas to calculate daily, weekly, monthly, etc. Floor Trader Pivot Points:

Quoted from:
Thomas Bulkowski (September 7, 2024) - Swing Traders: Pivot Points.

 

DJIA Index (daily bars) — Weekly Pivot Levels (September 3 - 6) & Daily Pivot Levels (Friday, September 6).

See also:
John Seckinger (2004) - Take a Two-Dimensional Approach: A Sophisticated Look at Pivot Points.

Franklin O. Ochoa Jr. (2010) - Secrets of a Pivot Boss - Revealing Proven Methods for Profiting in the Market.

MyPivots.com (2024) - Daily and Weekly Trading Metrics for the Dow Jones Industrial Average Cash Index.

Contraction > Breakout > Expansion | Toby Crabel's Price Patterns

Larry Williams described all of market's action
in 8 patterns characterized by direction, contraction
and expansion (e.g. HERE)

In 1990 Toby Crabel published Day Trading With Short Term Price Patterns and Opening Range Breakout. The book is about the fundamental nature of price action, about contraction and expansion, the ebb and flow of price in all markets. Looking at daily bar charts, expect breakouts and / or changes in trend after the following price bar patterns:

 

Narrow Range (NR): A price bar's range less than the previous bar's range. The opposite of NR is Wide Spread (see below). NR is technically NR2 when compared to NR4, NR5, and NR7 (see below; more e.g. HERE).  

Narrow Range 4 (NR4): A price bar's range less than the previous 3 bars' ranges is the narrowest range in 4 days or NR4. The opposite is WS4 (see below; more e.g. HERE). 

On Dec 13 (Thu) the E-mini Nasdaq 100 Futures and other US stock indices performed a IDnr4 down day.

Narrow Range 5 (NR5): A price bar's range less than the previous 4 bars' ranges is the narrowest range in 5 days or NR5. The opposite is WS5.
 
Narrow Range 7 (NR7): A price bar's range less than the previous 6 bars' ranges is the narrowest range in 7 days or NR7. The opposite is WS7 (more e.g. HERE).

Wide Spread (WS): A price bar's range wider than the previous bar's range is a WS. The opposite is NR. WS is technically WS2 when compared to WS4, WS5, and WS7 (more e.g. HERE).
 
Wide Spread 4 (WS4): A price bar's range wider than the previous 3 bars' ranges is the widest range in 4 days or WS4. The opposite is NR4.
 
Wide Spread 5 (WS5): A price bar's range wider than the previous 4 bars' ranges is the widest range in 5 days or WS5. The opposite is NR5. 

Wide Spread 7 (WS7): A price bar's range wider than the previous 6 bars' ranges is the widest range in 7 days or WS7. The opposite is NR7.

Inside Day (ID): If the high of the current day is lower than the high of the previous day AND the low of the current day is higher than the low of the previous day we have an ID or Inside Day. The opposite is an OD (more e.g. HERE).

Outside Day (OD): If the high of the current day is higher than the high of the previous day AND the low of the current day is lower than the low of the previous day then we have an OD or Outside Day. The opposite is an ID (more e.g. HERE).

Inside Day (ID) and NR4 (IDnr4): An IDnr4 is a combination of an ID and a NR4. This happens when the current day's high is lower than the previous day's high AND the current day's low is higher than the previous day's low AND the range is the narrowest when compared to the previous 3 trading days (more e.g. HERE).

2 Bar Narrow Range (2BNR): The 2-day-range (the higher of the 2 highs less the lower of the 2 lows) is the narrowest 2-day-range in the last 20 trading sessions.

3 Bar Narrow Range (3BNR): The 3-day-range (the higher of the 3 highs less the lower of the 3 lows) is the narrowest 3-day-range in the last 20 trading sessions.

4 Bar Narrow Range (4BNR): The 4-day-range (the higher of the 4 highs less the lower of the 4 lows) is the narrowest 4-day-range in the last 30 trading sessions.

8 Bar Narrow Range (8BNR): The 8-day-range (the higher of the 8 highs less the lower of the 8 lows) is the narrowest 8-day-range in the last 40 trading sessions.

BearHook: A NR with the Open less than the previous bar's Low AND the Close greater than the previous bar's Close (more e.g. HERE).

BullHook: A NR with the Open greater than the previous bar's High AND the Close less than the previous bar's Close (more e.g. HERE).

Stretch: The Stretch is calculated by taking the 10 period SMA of the absolute difference between the Open and either the High or Low, whichever difference is smaller. For example: if Open = 1,250, High = 1,258, Low = 1,240, then take the value of 8 for that day because 1,258 - 1,250 = 8 which is smaller than 1,250 - 1,240 = 10. Then add together all of these values for the last 10 trading days and divide this by 10 to get the 10 day SMA. This value will then become the Stretch. The Stretch is used in calculating where to enter the trade and where to place a stop using the ORB and ORBP trading strategies (see below). 

Simple Moving Average (SMA): An SMA is calculated over a number of candles/bars in a chart as the simple average value of that number of bars, e.g. the SMA for the last 10 days closing prices of the DJIA: add together the closing prices for the last 10 days of the DJIA and then divide that by 10 = 10 day SMA. You do not need to use just the closing price to calculate this. You can also use the Open, High, Low, and Close or a combination of any of those, e.g. HLC/3.

Opening Range Breakout (ORB): Using this strategy, a buy stop is placed just above the Open price plus the Stretch and a sell stop just below the Open price minus the Stretch. The first stop triggered enters the trader into the trade and the other stop becomes the protective stop. The earlier in the trading session the entry stop is hit the more likely the trade will be profitable at the close. A market movement that kicks off a trend quickly in the current trading session could add significant profit to a trader's position by the close and should be considered for a multi-day trade. As time passes and we are not filled early on then the risk increases and it becomes prudent to reduce the size of the position during the day. Trades filled towards the end of the day carry the most risk and the later in the day the trade is filled the less likely the trader will want to carry that trade overnight (more e.g. HERE).

Variations of this strategy include the Opening Range Breakout Preference (ORBP): An ORBP trade is a one sided ORB trade. If other technical indicators show a strong trend in one direction then the trader will exercise a "Preference" for the direction in which to trade the ORB trade. A stop to open a position would be placed on the side of the trend only and if filled a protective stop would then be placed. The calculation of where to place the "stop to open" would be the same as that for the ORB trade: For longs, the Open price plus the Stretch and for shorts the Open price minus the Stretch. The ORBP trade is a specialized form of the ORB trade (more e.g. HERE). 

S&P 500 Index vs 4 Lunar Month Cycle

The Delta Inversion Time Window opened with the Full Moon on March 01st (Thu), and currently suggests the following: The Intermediate Term Delta rotation inverted (compared to 4 lunar months earlier - details HERE) with the #1 Low on Friday, March 2nd, and a #2 High on Tuesday, March 13th. Then a #3 Low between Wednesday, March 28 and Monday, April 2 are likely (see also HERE). After a brief recovery (#4 High) another low in mid-April should be followed by new all-time-highs into May-June. If this inversion isn't done yet, we would only see some brief sideways-to-down movement into Tuesday, March 13th, followed by a further advance into the end of the month or early April, and another brief correction before new higher highs. Time will tell.

S&P 500 and DJI just forming congestion triangles while NDX keeps surging to new all-time-highs (HERE)? Next week is populated with contradicting solunar events and stock markets may simply chop side-ways-to-down into the New Moon (HERE)

DJIA Forecast 2017 vs Actual & Outlook into 2027 | Thomas Bulkowski

On January 1, 2017 Thomas Bulkowski presented a forecast for the DJIA in 2017 (middle chart). Comparing this forecast with the actual DJIA (top chart), he now remarks on October 14: "Notice that peak A comes well before B, and it's higher than B, too. Bad timing. The index dipped and has recovered up to C, nearly matching the prediction. Here's where the ride gets scary. Notice how the market drops, and fast, too, after C. That's about a 1,500 point drop in a month. Ouch. This forecast isn't guessing. It's based on what has happened in prior years. Click the above link for more details. However, just because it's a mechanical forecast doesn't make it right. So we'll just have to see what happens in the next four weeks."

Also on January 1, 2017 he published a forecast for the DJIA covering a decade of price movement into 2027 (lower chart): "The vertical magenta lines show important turns. Price is fine during most of 2017 until the Dow peaks in October. Then the big decline starts in what looks to be a bear market lasting to 2019. Then we get a nice run up which continues until at least 2027."

Weekly Chart Pattern Indicator Turned Bearish | Thomas Bulkowski

After the close on Friday, July 29th, Thomas Bulkowski's Chart Pattern Indicator for the S&P 500 Index turned bearish.
The indicator is a ratio of bullish patterns to the total of bullish and bearish patterns, expressed as a percentage.
More details on Thomas Bulkowski's Chart Pattern Indicator background (HERE)

The chart pattern indicator line is not as important as the signals which it generates, but I have included a chart of
the indicator itself so you can check for divergence. Divergence often gives hints as to which way the index moves in the
future. Look for lower/higher peaks in the indicator while the index is making flat or higher/lower peaks. The index will
often follow the indicator (HERE)
Warning:
If you use this indicator for periods shorter than weekly, you will likely be in for a nasty surprise. Due to the way I have it
configured, signals up to a week old can change or disappear. Thhe current sell signal may not be valid for another week or it
may change in a few days when more NR7s break out. Thus, this indicator is best used as a weekly signal (that
is, signals older than a week are reliable) of market trend (HERE)

German DAX vs Inverted 4 Lunar Month Cycle

However, the Nasdaq dropped only by -0.1% or -2.65 points on Nov 4 (Wed) while the RASI was still rising, and Thomas Bulkowski
remarks: Since 02/05/1971 the Nasdaq made 541 similar moves on a percentage basis. After those moves, the next day's: Average
gain was 0.7% on 295 occasions. Average loss was -0.9% on 246 occasions. Expect the index to close higher 54.5% [on Nov 5].

Tekkie Suresh: "Rahu getting involved with Venus and Mars, points to a trough around November mid month, Should see  a recovery thereafter."

Jeff Hirsch (Nov 3, 2015) - In the most recent 21-year period spanning 1994 to 2014, November opens strong, peaks around the fourth
trading day, trades lower till the eighth trading day, bounces mid-month, moves sideway to down during the week before Thanksgiving
then higher to close out the month with gains ranging from just under 1.5% for Russell 2000 to over 2% for DJIA.