Pullback Depth

How Draconic reads it

Pullback depth is a trend health indicator: the depth of retracements reveals the balance of power between trend participants and counter-trend participants. Shallow pullbacks (23.6–38.2% of the prior impulse) indicate strong trends where buyers re-enter aggressively at minor discounts. Deep pullbacks (50–61.8%) indicate weakening trends where buyers require significant discounts before committing. Pullbacks beyond 61.8% often signal structural trend breakdown rather than continuation. Pullback depth combined with velocity on the pullback — a shallow, fast pullback is the healthiest combination — distinguishes trends worth holding from trends that are quietly deteriorating while price still prints higher highs.