V.8:6 (222-224): Price patterns in soybeans by Toby Crabel

Price patterns in soybeans by Toby Crabel

In my search to determine whether price patterns signal the next day's market direction, I have tested all combinations of four closing prices followed by either a higher or lower open the day after the last close. I used the soybean market between 1970 and 1988 and studied 32 patterns based on open, high, low and close. The only criterion to determine the direction of the next day's trade was gross profits.

The five-day patterns in Figure 1 are symbolized by a + for an up closing relative to the previous day and a - for a down closing, with the exception of the last symbol in the pattern, which is the open and the point of entry for the day of the trade. For example, pattern 30 starts on day 1 with a lower close than the previous day (-). Day 2 has a lower close than day 1 (-). Day 3 has a lower close than day 2 (-). Day 4 has a higher close than day 3 (+). Day 5's open is lower than day 4's close (-). A sale is assumed and entry is taken on day 5's open with trade exit on day 5's close.