Dragon pattern

[Pekelo]

I guess we just can't have a day without the pattern showing up. Here is today's dragon. It was a bit hard to see and recognize because the W was stretched out but the Failure came right at the SMA line and gave a nice 8 pts drop and a 7 pts bounce.

Height: 8 pts
Failure: at 5 pts
3rd: 7+ pts

After the Failure for a good 5 minutes the market was hesitating 2 points below the Failure point, so there was plenty of time to switch to short. On the chart a Doji showing this after the F. touched the SMA...

 

[Pekelo]

Today we had the "mirror image", the upside down dragon:

Height : 11 pts

Failure: at 5 pts

3rd top: 13 pts

Now lately in upside down dragons the 3rd top came about 80% of the Height. Today we made almost 115% of the height and the drop from there was a weak 3 pts only. Maybe this is the sign of the market turning...

 

[Pekelo]

Today again the obligatory upside down dragon:

Height: 12 pts

Failure: at 4 pts (should have gone down to the SMA, making it 6 pts)

3rd top: 13 pts

At this time after the 3rd top we got a pretty sweet drop...

 

[Pekelo]

I have just noticed, but yesterday's 780 was an even stronger sell signal because there was another bigger upside down dragon present on the 2 days/15 mins chart. Thus the dragon in the previous post was a dragon in a bigger dragon, and they both indicated 780ish for a sell:

Height: 23 pts

Falure: at 12 pts

3rd top: 22pts

I mentioned this earlier, that although the price did go through the SMA before failing, but it didn't close below it, a strong sign that a failure would occur....

 

[stoneface]

Quote from Pekelo:

I have just noticed, but yesterday's 780 was an even stronger sell signal because there was another bigger upside down dragon present on the 2 days/15 mins chart. Thus the dragon in the previous post was a dragon in a bigger dragon, and they both indicated 780ish for a sell:

780 was also daily SMA 9, yes? Good reason for the rally to stop cold there as well.

 

[Pekelo]

Quote from stoneface:

780 was also daily SMA 9, yes? Good reason for the rally to stop cold there as well.

Correct, good observation...

Here is the newest dragon still in progress, 5 days/15 mins chart:

Height : 38 pts

Failure: at 17 pts

3rd bottom: projected 714 (cash)

P.S.: There were 2 tops at 780 I probably should have used the Wendesday top to make the W more symmetrical, but since they are at the same price level, it doesn't matter...

 

[Pekelo]

Quote from Pekelo:

3rd bottom: projected 714 (cash)

This morning around 6:45 we already reached 711.25 ES, the equivalent of 714 cash and bounced from there up to 716...

As mentioned twice already, the size of the bounce can not be forecasted, so we might find a temporary bottom here and we keep going up or this 5 pts all we got...

Nevertheless the pattern worked and now it has played out and been completed...

 

[stoneface]

Freaky but... Pek's dragon worked in GLD too ...

failed double top 91.91

Height 0.40

Max high reached 92.06

Perfect match to the penny...

So weird how the market does that..

 

[Pekelo]

Today's obligatory dragon was rather small, but the whole day was a low volatility affair:

Height: 8 pts

Failure: at 5 pts

3rd bottom: 7 pts from Failure

Ended in a 4 pts bounce...

 

[tradersboredom]

uptrend and downtrend.

trend is your friend

all this dragon pattern analysis is waste of time.

right now we are in the end of a downtrend from June 2008 selloff and this market is stablizing or even due for short covering profit taking. this market is mostly trading market long term investors with lots of cash still on sidelines and will only comeback after market has rallied 50% from lows.

this downtrend which broke support on june 2008 acutally started selling off on 2006 and 2007 but had fake support. and short squeezes at the top. air support finally broke on june 2008 after 2 years of air support. the sub prime b.s was already know in 2007 early.

Quote from Pekelo:

By popular demand I explain in this thread the dragon pattern with examples. If you still have questions (although you shouldn't ) just ask.

Q: What is the dragon pattern?
A: It is a failed double bottom pattern, where a failure occurs around the half of the W's height after the 2nd bottom and falls lower making a 3rd bottom, where it bounces.

Q: Why is it called a dragon?
A: Because according my vivid imagination, it reminds me of a dragon. See the picture below. If it bothers you, you can call it "The Pekelo".

Q: Could you explain it more?
A: Here are the definitions, a W refers to a double bottom, because it looks like one.

Height: The price distance between the 1st bottom and the middle of the W.

Failure: The point after the 2nd bottom where the rally stop advancing and starts to fail. Usually happens around half of the Height counted from the 2nd bottom, quite often at the SMA line.

3rd bottom: The price drop from the Failure point is app. the same as the Height.

Q: What timeframe do you use it with?
A: Pretty much with any. I will show examples of 5 mins, daily and weekly.

Q: So how do you use it?
A: Once a double bottom happens, you have to be aware that it might fail. So assuming you are long from the 2nd bottom, you are watching what happens at the half of the Height, and if a failure occurs, you switch to shorts. Then you do the quick math and you will have a 3rd bottom expectation where you switch back to long for a bounce.

Q: How big a bounce?
A: No way to tell. It can be just a few points or it can signal the bottom of a downtrend, just like it did last year.

Q: Double bottoms-double tops. Does it have a reverse version?
A: Yes, I call it upside down dragon.

Q: What is it?
A: An upside down dragon is a failed double top (M) pattern where after the 2nd top a failure occurs in the downmove and a 3rd higher, very shortable top occurs.

Q: Is there any difference between between these dragons?
A: The only thing is with the math, it tends to move only 80% of the Height from the point of Failure.

Q: OK, can you post a chart?
A: Sure....