The Dragon pattern is often found when trading using technical analysis. The Dragon pattern is similar to the W pattern or the Double Bottom pattern, but it has its own distinctive characteristics.
Most often, the “Dragon” appears near the market lows and highs. In general, the “Dragon” is an excellent opportunity to open low-level trades in relation to potential profit.
The formation of the pattern begins “from the head”, then the price decreases, thereby forming 2 “dragon paws”. The second paw indicates a possible price reversal. A good sign of a reversal is an increase in the volume of contracts being made following a price reversal in the market. From the formed “dragon head” to the “hump”, you can draw a trend line when the pattern is formed.
A trend reversal signal is the price closing above the trend line (we get confirmation graphically). Another confirmation is the close of the price at the “hump” level – an oscillatory high formed between the “feet of the dragon”.
Pattern structure:
A – this is the “Head of the dragon”
B – this is the “First leg of the dragon”
C – this is the “Hump of the dragon” (should be located in the range of 0.38 – 0.5 from AB
D – “The second leg of the dragon”
E – The formed breakout point of the trend line
F – The first point fixing part of the profit – 1.27 from CD
G – The second point for fixing part of the profit – 0.886 – 1.0 ВС
Н – The third point for fixing profits – 1.38 from AB
