Dragon, Double Bottom and ABC Bullish Patterns with Market Context

December 21, 2012 · Posted in ABC Bullish, Double Bottom, Dragon, Fib. Zone Pivots · Comments Off on Dragon, Double Bottom and ABC Bullish Patterns with Market Context 

ABC is one of the most universal pattern. This pattern is the most simple pattern but very powerful as it is part of at least 10 other patterns like Gartley, Butterfly, Double Bottom/Tops, Dragons, H&S and Inv. H&S etc. In Double Bottom patterns, the two bottoms are never really equal and may have 5 to 8% difference in their depths. So, these Double Bottom patterns also form Dragons with distinct hump and two legs. Both these patterns have ABC
embedded in it. The confluence of these patterns gaves a great opportunity to trade from Long side using ABC as a guide.

Today ES sold off from overnight on fiscal cliff news. ES traded about 50 points down overnight but recovered 30 points at the open. This morning I was patient to develop any potential patterns to trade. Around noon, I started noticing price is entering into the extreme Support Zone (Fib. Zone Pivots) of 1415 to 1418. Fib. Zone Pivots do provide great support and look for any patterns to develop to trade. Around 12.50pm, I noticed price is forming a double
bottom pattern in the FZP and started to breakout. This pattern also has Dragon setup with a smaller ABC inside. Trading these patterns strongly supported by the FZP is an excellent opportunity. I also watched CMI and other VLTY. VLTY is safely below 50 and CMI3 was green and CMI5 was nearing GREEN setup.

ABC Bullish pattern signaled EL (Entry Level) at 1419 with a stop at 1416.5. Targets were 1421.5, 1424. Around 1pm I entered a Long trade at 1419 with a STOP at 1416.5. At 2pm, I exited my trade at 1421.5 (+2.5) and 1424 (+5 pts).