Dragon pattern

OK, I took you off of the Ignore list for the sake of science. :)

Quote from JSSPMK:

I sense Pekelo has me on ignore...

Ok, monthly Ninja, dragon or not? Just curious.
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If I recall our differences were about peak oil or so. If you promise not to mention abiotic oil, I will keep you off of my Ignore.

Anyhow, it does look like a nice dragon, I will run the numbers, but it looks like the 3rd bottom is in. Since it is the dollar and we had a weak dollar based rally, and we might just had a top in the market, the two (dollar bottom and market top) nicely go together...
My only problem with forex and oil/gold, that their movements are based on fundamentals and news too, so just using TA alone can be missleading....

So the numbers are:

Height 14.7
Failure at 95

3rd bottom expected: 95-14.7 = 80.3

We already reached that and bounced, currently at 81.7 (a bit hard to read the numbers where there are no lines)

Now your next question will be: Is this THE bottom? The dragon pattern doesn't tell us how big the bounce is going to be. Several times trends do end in a dragon pattern, but only time will tell us if that is the case...

In the market we got a 20 ES pts drop from the 3rd top, that was fairly decent. Is it going to be THE top? I don't know. The pattern has already played out...

The general rule is that (obviously) we shouldn't reach that top again. So if you are shorting the market, you can use 1197 cash (1193 ES) as a stop loss...
 
Understood, TY!

Technically I see it bouncing towards 90 zone as a likely event. In fact I would have even said 100 since it has been a support for so many years. But it is tough to rate that event taking place at present.

Is it the bottom? Answer rests either in time or personal belief. It's impossible to make an argument based on technicals as there isn't enough evidence at present.

In the meantime, highly recommended read.


http://thedailygold.com/chartstechn...o-mid-2011-u-s-dollar-collapse-again/?p=4672/
 
Quote from Pekelo:

We had recently another nice one,
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Just a sidenote about AH and RTH. We first reached the 3rd top during AH, Sunday night, 92.75 ES, what was the equivalent of 97 cash, since the difference is about 4 pts right now. That was very shortable, and the futures pulled back 6 pts until before the open.

Then we repeated the runup, hitting again exactly 92.75 ES after the market opened. I did expect this reload, because most of the time the pattern plays out in RTH.

But it was interesting to see that the predicted top was hit both AH and RTH at the exact same level....
 
Just to show that the pattern can be used on stocks or ETFs, here is a beauty on the ultra short silver ZSL:

Originally posted 2 days ago, although a little late, the pattern was already in advanced form:

Quote from Pekelo:

I should have mentioned earlier, but the ZSL is making a dragon pattern...

The height was about 4 points and the Failure happened (daily chart I am talking about) at the SMA 9 line around 13.8, so the predicted 3rd bottom is 13.8-4 = 9.8

Currently 11.24,

2yv2rrd.png
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...and this is how it ended:

2586pg1.png


The 3rd low was at 10.21. I did mention in RM's thread that the 9.8 predicted low can happen +/- 50 cents higher or lower....

P.S.: Sharper eyes might have noticed that I cheated a bit when drawing the 2nd bottom. It actually happened higher, but this way it is easier to see the double bottom, and that is where the 2nd bottom should have been, theoretically... :)
 
I didn't see this post at the time when it was asked:

Quote from JSSPMK:

Daily SPX possible dragon early stage?
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Well, actually, yes, using a little creative accounting and 20/20 hindsight. The shape is there, the math is almost perfect, but the 3rd top happened WAY higher where it should have. Let's see:

1zegg9s.png


Height is about 28 pts, and the Failure should have happened around the SMA line, where I drew the line. Instead it was overshot by a good 7-8 pts (arrow). Nevertheless the 3rd bottom came with that 7-8 pts higher, making the shape and math perfect....

It also signaled the end of the downtrend/pullback.
 
Have you run any stats to backtest this pattern? I'm assuming that sometimes the breakout just keeps going, rather than rebounding - where would you place your stops to avoid getting run over in that case?
 
Quote from Pekelo:

I didn't see this post at the time when it was asked:



Well, actually, yes, using a little creative accounting and 20/20 hindsight. The shape is there, the math is almost perfect, but the 3rd top happened WAY higher where it should have. Let's see:

1zegg9s.png


Height is about 28 pts, and the Failure should have happened around the SMA line, where I drew the line. Instead it was overshot by a good 7-8 pts (arrow). Nevertheless the 3rd bottom came with that 7-8 pts higher, making the shape and math perfect....

It also signaled the end of the downtrend/pullback.
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buddy, you're making things more complicated than they should be.

that is a double bottom you're seeing...
 

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No backtest if you mean a programed pattern recognition running on a bunch of stocks in the last few years. But this thread was started almost 2 years ago, and I have been posting dozens of examples, so there should be plenty of data to do a little research.

There is almost always a little 3rd top/bottom, even if minoscule. As for your stop question, since the 3rd top/bottom can happen more in a zone than at the exact price what the math determines, a 20-30% of the Height should be wide enough not to stop out too early but tight enough not to get burnt.

So let's say the Height was 10 points and the math says the 3rd top should be around 1255, I would put the stop at 1258.

Also another rule that I mentioned earlier in this thread: If the 3rd top/bottom did happen that level shouldn't be breached again. So if you are in the position already you can put the stop loss at the level of the 3rd top/bottom.

By the way we just had another dragon on the daily SPX, but the math was all messed up. The shape was there but the numbers didn't fit.....I will post the chart tonight...
 
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