Trading Double Bottom/Dragon pattern using ABC Pattern
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).
THE RISK OF LOSS IN
INVESTING STOCKS, FUTURES, OPTIONS, FOREX OR COMMODITIES CAN BE SUBSTANTIAL.
YOU SHOULD THEREFORE CAREFULLY CONSIDER WHETHER SUCH INVESTMENTS
ARE SUITABLE FOR YOU IN LIGHT OF YOUR FINANCIAL CONDITION, YOUR
INVESTMENT EXPERIENCE AND OBJECTIVES, FINANCIAL RESOURCES AND
OTHER RELEVANT CIRCUMSTANCES. PAST PERFORMANCE IS
NOT NECESSARILY INDICATIVE OF FUTURE RESULTS, AND LOSSES ARE ALWAYS
POSSIBLE. THE STRATEGIES OR TRADE SETUPS MENTIONED
HEREIN SHOULD NOT BE CONSTRUED AS CONSERVATIVE STRATEGIES BUT
RATHER SPECULATIVE AND FOR SHORT-TERM TRADING PURPOSES ONLY.
THERE IS EQUAL OR GREATER POTENTIAL FOR LOSS WHILE USING THIS STRATEGY AND TRADE SETUPS.
All information, graphs and depictions represented in this site
are OPINIONS and HYPOTHETICAL PERFORMANCE RESULTS and should be
recognized as such and are not solicitations or instructions to
execute orders. You shall be responsible for any decision to purchase
and/or sell any of the futures products depicted herein. The owner of this
site makes this material available to the public but assumes absolutely
no responsibility or liability. The website contains links to
other websites. These links are provided as references to identify
and locate other internet resources that may be of interest. These
other websites were developed by parties independent of the owner
of this site and as such the owner does not assume responsibility
for the accuracy or appropriateness of the information contained
at, or endorse the viewpoints expressed at, such websites. Copying
with intent to redistribute any part of this website is expressly
prohibited without prior written consent and is and punishable
under United States copyright law. All rights reserved.