Technical Analysis provides investors with many trading opportunities in the form of patterns, candles and indicators. A graphic model with a clear structure and rules of trade, giving an excellent opportunity to make a profit, is called the Dragon pattern.
The main market bases or market peaks include turning points. These are the highs of fluctuations in the M-top and the lows of fluctuations in the W-base. The Dragon Pattern highlights these turning points and provides the ability to trade based on principles and methodology. The dragon pattern is visible in all time intervals.
Bull dragon patterns appear at the bottom of the market, and bears – at the top of the market. Like other double-bottomed models, dragon models provide an excellent risk-profit ratio.
Pattern Dragon is formed from the “head” when the price drops from a high vibration level to a minimum of vibration, creating the first “leg” of the dragon. A quick reversal from this low oscillation when trying to rise to 38-50% of the previous oscillation creates a key maximum fluctuation or hump level. Another pullback from the hump level creates a second minimum oscillation. The end of the second minimum oscillation indicates the potential formation of a dragon.
These two minimum vibrations (legs) are usually from 10% to 15% of the price difference. Price movement from the second minimum of fluctuations should show key reversal bars or divergences in any momentum-based indicators. A little volume usually occurs in the second leg. Trades open when the second minimum oscillation is completed, and targets are placed in the tail section of the dragon pattern.
The trendline should be maintained by combining the dragon’s head with the average maximum vibration at the hump level. At the end of the second stage, which is confirmed when the price closes above this trendline, the first trade (long position) is entered. Confirmation of a strong reversal of the price action can also be achieved by divergence in all pulse-based oscillator indicators, such as the relative strength indicator. A more conservative deal to enter a long position opens when the price closes above the hump. Stops should be placed below the lowest of the two oscillation falls.
First target range for dragon transactions the bull is set to 62% to 78% of the vibration range from head to toe measured from the level of the second leg. The second target is set at 100% range of fluctuations, and the third target is fluctuations of 127-162%.
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