Below is a graph of George Lindsay`s idealized 3 Peaks and a Domed House chart pattern which shows the basic shape that the pattern should take, in real time it can have slight variations but the basice shape and points must be as shown to become a valid pattern.
The 3 peaks and Domed House is really such an exceptionally rare chart pattern that I don't focus on identifying it or even trading them in real time when I do discover one. Also, I am not really familiar with the track record of this chart pattern. Maybe such a track record will never be existant because we are really talking about a Pink Unicorn that is sooo rare that you can't handle it when you see one out of sheer surprise of recognizing it.
But it is for sure one of the most famous chart patterns. Perhaps because it can predict something that actually can`t predicted. Namely, the Black Swan!
I discovered the FDAX Pink Unicorn only because I noticed this accurate and somewhat rare Roof chart pattern has formed on the daily FDAX chart, where the alltime-high at 15806 index points forms the gable of the Roof:
The right part of the Roof is now 6 times confirmed lower day highs resistance. At the same time, the right side of the Roof is extremely perfectly designed falling alltime-high resistance rail & daily and weekly closing base resistance. Roof patterns are rare and the performance isn`t good either cause breakouts can be in any direction, however downward breakouts predominate at 58% of the time.
So the likelihood is, the FDAX should drop below its formed 15290 pts Roof support horizontal and it`s dark-green lined rising daily main support that was lost with Thursday close and was re-conquered by the official week close.
Imagine what should be the outcome when this „double" support area on the daily chart should be resolved to the downside in course of the coming days...?! Well, usually it should decline rapidly and relatively hard, or?
Here is a daily chart of the FDAX going back to the beginning of 2020. It shows how the alltime-high Roof above may be related to the possibly underway 3 Peaks and a Domed House:
Point 10 is always lower than either points 4 or 6 but often both. For FDAX this formation point 10 is the October 30, 2020 low point. 10-14: price forms a base leading to the dome.15-20 is the "roof of the first story," composed of 5 reversals beginning with the first one at 16 and ending at 20. The price movement has changed from upward in the first story wall (points 14 to 15) to a horizontal but choppy sideways move 15 to 20.
21-25: Price moves in a choppy manner forming a Dome or Roof on the second story. Lindsay observed that point one of points 21, 23, 25 or even 27 generally occurs about 7 months and 8 to 10 days after point 14. The 14 to 23 time projection lands in late July 2021. Sometimes the time count has to be made from point 10. The count 10 to 23 ends June 6, 2021.
The formation point 23 is the alltime-high, printed at 15806 on June 15, 2021.
After peaking at 25, price tumbles to 26, retraces to 27 before heading lower to 28, completing the pattern. Point 27 often tops out near the price level of point 15, forming the right edge of the first story roof. And well, it MIGHT be the outcome that point 25 has to be made in course of next trading week, followed by hard decline into possible 28 lows...
My own feeling right now is that I have really no idea if FDAX indeed has found a next intermediate cycle high at 23 alltime-high, what is also very difficult to assess when the S&P 500 and the US Tech indexes and most of the FANG stock have been running from one high to the next for weeks. I mean, it is just very difficult to lean to the bearish side when the most important stock markets still look uber bullish.
However..., the FDAX 3 Peaks and a Domed House allows that the party in the US stock markets could end very, very soon. And might end badly! The FDAX could be the harbinger that there may come a Black Swan event. Because this 3 Peak and a Domed House pattern currently forecasts that the FDAX could drop about 2000 index points into September-October!
On the other hand..., the very bullish resolution could be this one, for example:
Above you find the monthly chart. One main issue is that price has now been fighting its way through the dark red zone of its Lifetime resistance for 4 months. At the same time - since 4 month candles - it also fights its way through the naturally tough resistance environment of the 1st GUNNER24 Double Arc which the classic 8-Fib number initial up impulse starting at the # 1 // March 2020 Bear Market Low automatically sets for it.
And battling trough the combined resistance magnet formed by first rising Lifetime resistance area, and second, monthly 1st double arc resistance area without producing an exhaustion or any kind of correction or a monthly reversal candle in the monthly time frame is CLEARLY a very bullish behaviour. Which in turn indicates that the FDAX probably wants to go through this double resistance magnet area.
And if we remember the GUNNER24 Trading Rules, the first monthly closing price above the upper line of 1st should mean the next powerful buy signal on the monthly chart, as long as this occures within July 2021 to August 2021.
Ergo: IF FDAX delivers a monthly close above current 15806 pts alltime-high til August 2021 close it activates the next higher lower line of a double arc in trend direction what is the lower line of 2nd double arc. What then with a +70% probability has to be tested within months and maybe has to be worked off towards the end of 2021/early-2022 at 18000 to around 18200 pts surroundings!
==> now we can really appreciate the FDAX 3 Peaks and Domed House pattern, I think. It could be that this Pink Unicorn is the ultimate warning sign that after the last tough upward months, the combined Lifetime & 1st double arc resistance magnet will win in the end only to trigger an about 2000 pts sell-off within weeks/months.
==> We now need to watch very closely what the FDAX is doing over the next few trading days and whether the 3 Peaks and a Domed House pans out negatively to sense whether a major summer top in the US equity markets is within reach or will soon be necessary!
Be prepared!
Eduard Altmann