Fibonacci Traders

Trading Fibonacci, fractals, RSI and CCI

Fibonacci retracement

  Fibonacci retracements

  They take place in an upward or downward trend after an impulsive

  price movement.

  Observe chart (below)

  IBM stock, monthly chart

  A chart is showing a bullish 61.8% Fibonacci retracement at a green

  horizontal line. 

 

   Chart 2:  Microsoft Corp stock, weekly chart

   A chart that is exhibiting a bearish 50% Fibonacci retracement

   at a red horizontal line.  Notice also that the price has displayed a

   lower high.  It has also fallen below the bullish trend line,  

   and was retesting it on the edge.  Nice one.

   

    Bullish retracements are accentuated in a ascending channel, yet bearish ones

    emerge in a declining channel.  The most popular Fibonacci retracements are

    38.2%, 50%, 61.8% and 78.6%.  The minor is the retracement, the longer

    is the extension.  

    For example 38.2% Fibonacci retracement is extra bullish

    (extra bearish in a down trend) than 61.8% trade setup.  

 

   Frequently, Fibonacci retracements are superficial pullbacks or rallies. They

   are contra-trend mini cycles with little volume stock trading.

   

    Look At charts

    Nike Inc stock, 4-Hour chart

    This chart is illustrating a 38.2% Fibonacci retracement with a declining trading volume. 

    The declining volume indicates a lack of bearish intention to sell after the preceding

    bullish movement under a huge volume.  A bullish trade setup is in place.  One will now

    apply the trading drill and triangle like a pro

   

   


   One should be suspicious about Fibonacci retracements under huge

   volume stocks trading except during the corrective stage of an

   Elliott wave cycle.

 

   Classes of retracements

   Dealers generally assume that a Fibonacci retracement should constantly be

   simplistic or a neat pullback or rally.  Still, at times they are complex. There are
   Zigzag or double and triple zigzags, contracting or expanding triangles plus

   flat retracements.  Traders who know the Elliott wave price structures are

   familiar with the indicated untidy settings.

    See chart (below)

   British Pound/Australian Dollar, weekly chart

   This chart is illustrating a complex 38.2% Fibonacci retracement in the form of

   a green zigzag Elliott wave pattern. 

  

  

   At Any Time a Fibonacci retracement obliterate the preceding impulsive

   move; it is termed total or 100% retracement.  That retracement often

   times happens due to financials as the price returns to a cycle point.

   See the graph

   Caterpillar Inc (CAT) stock, monthly chart

   A chart that is highlighting a total Fibonacci retracement at 100% or

   cycle point.   A total Fibonacci retracement often cancels prior trend

   or impulsive price action. 

   

 

   The earliest thing a stock market partaker should do after a total retracement is to

   perform the Google finance acid test or a thorough fundamental analysis. This permits

   Wall Street market professionals to ascertain the actual objects.

   Though, many traders avail themselves of those Fibonacci retracements like

   magical support or resistance regions, they are not.  One should wholly accept

   them together with the trading drill and triangle.


   Fibonacci simplified


   38.2% is nearly 40%
   68.2% is roughly equal to 70%
   78.6% is around 80%
   One may state 38% Fibonacci retracement is about
   40% profit-taking and 78.6% is relatively
   80% reduction to the most current highest
   price.  Numerous bullish stocks or commodities with viable financials at 78.2%

   price cut are oversold.  On the other hand, the indicated which surge to 78.6%

   Fibonacci retracement after an initial bearish price move are overbought if

   fundamentals are weak or deteriorating.  Nearly All hedge funds and additional

   big investment firms favour those oversold and overbought price levels.

 

   Validation of 38% Fibonacci retracement level


   From a technical analysis viewpoint, there are three confirmations.

   During an uptrend,
   1/ price should be in a rising channel,
   2/ price should breakout of a resistance,
   3/ price must confirm the resistance as a support.
   One will also align the technical analysis with the financials.

   View this video

   Title:  How To Master The 38 2 Fibonacci retracement

   Description:  Learn and master how to trade the 38.2% Fibonacci

   retracement with a greater success.  Follow the correct steps to

   identify the best 38.2% Fib level trade setup. 

    

   

   During a downtrend
   1/ price ought to be in a declining channel,
   2/ price must decline below a support level,
   3/ the support must change into a resistance.


   Band between 50% and 61.8% Fibonacci


   Traders call it sweet spot zone because large trading pursuits often take

   place in it.  This swell in trading further signals the start of a new trend

   if both fundamentals and market conditions are recovering or worsening conjointly.

   After the motive wave, asset many times retraces into the sweet spot band.

    Look At chart

    United Technology Corp stock, monthly chart

    After the bullish trend (1993-2008), a healthy profit taking (2008-2009)

    landed the price into the sweet spot Fibonacci retracement zone.  Smart investors

    responded to the invitation to buy, and the stock began a new trend.  Note that the stock

    will continue to fall if the fundamentals and market environment were deteriorating.

    One ought to combine the technical analysis with a thorough due diligence. 

   

 


   50% and 61.8 retracements

   Dynamic bullish stocks often gain support at 50% Fibonacci retracement since

   clever bearish traders or investors will stay away.  

   Patterns


   These financial instruments hold sound fundamentals and regularly return

   succulent dividends to devoted shareholders.  Innovative firms that increase

   their market share are tough to sell.  If the stock drops into the 50% Fibonacci

   retracement region, a frenzy accumulation will begin as new comers follow

   the long-term investors.

 

   The 50% Fibonacci retracement is also a Psychological Price Level or PPL.  It splits the

   market into two territories.  Bullish above and bearish below. For this reason,

   a dynamic bearish stock will find it difficult to extend above this level as it

   has inadequate or degrading financials.

   See video

   Title: How To Combine Two Fibonacci Retracement

   Description:   A trading method or strategy that combines two Fibonacci

   retracement levels to pinpoint accurate buy or sell trading

   signals.

       


   Technical traders who gain mastery in the zigzag Elliott wave pattern are also

   veteran of the PPL trading.  Note that one can not achieve profitable trades if

   one is overlooking the fundamentals.

   Although, bullish traders have the upper hand at any time the asset price is

   above the PPL, bearish traders will not delay to defy the classic technical

   traders if the financials do not align.  The inverse is also correct below it.
   This event is natural in the Commodity markets.  In fact, the 50% Fibonacci

   retracement trading is widespread in this market.


   

   61.8% Fibonacci retracement


   Be aware that this Fibonacci retracement is below the 50% in an uptrend, as

   a result in the bearish territory.  In a bearish trend, it is in the bullish band. 

   Eager Elliott wave practitioners often place limit orders at 61.8% zone after the

   first Elliott wave to grab the third wave. In this occurrence, they will set their stop loss

   few pips below the initial wave low.

   The tactic derives from the wave principle that affirmed the second wave

   should not eliminate the 1st wave.  Technical traders should apply market geometry

   or channel projections to pinpoint reliable 61.8% hot spot trading zones.

   See charts

   Procter & Gamble Co stock, monthly chart

   The chart is highlighting the application of the market geometry to pinpoint a viable

   61.85 Fibonacci retracement trade setup on the edge.  Notice the initial blue channel.

   The second projected channel is in red colour.  The red horizontal line is at 61.8%. 

   See also the surge in trading volume at this hot spot trading zone.  A beautiful trade

   setup for TSTW SYS 008 traders is in place.

  


   As always if one recognizes a high probability trade, one will invariably apply the

   trading drill and triangle.

   78.6 Fibonacci retracement


   Typically, the Elliott wave corrective phase customarily leads the asset into the 78.6%

   Fibonacci retracement trading zone.  Theoretically, it is an oversold area after a bullish cycle 

   ends.


   The zone of 78.6% is overbought after bearish market cycles if the fundamentals have

   not changed.  If an asset is in the 78.6 zone but has passed Google finance

   acid test (strong financials), most smart investors will purchase it.  On the other

   hand, intelligent market participants will exchange assets that have failed the

   acid test if they reach 78.6% Fibonacci retracement zone.

   See the chart below

   McDonalds Corp stock, monthly chart

   A bullish trend started in 1983, but became unsustainable in 2000

   because of the bearish environment (due to the 2000 tech-bubble).

   An overdue correction began with vengence, and the asset dropped to

   the holy 78% Fibonacci retracement level.  Eager and smart investors

   recognized that McDonalds stock was fundamentally oversold.  The frenzy

   accumulation that began in 2003 pushed the asset price from the pink

   line to its highest price today at $100.  Will it cross the $100 level or is

   another Fibonacci retracement (market correction) waiting to begin?  

   The future will tell.  One thing is certain, after a prolonged trend

   there will be a healthy correction.  It may be delayed, but it is vital for

   an orderly financial market

 
Other fib retracements

88.2% Fibonacci retracement

Traders who understand Fibonacci patterns such as bat or butterfly 

patterns are familiar with the indicated level.  Traders also described

the present patterns as harmonic patterns on account of the harmonious

correlation between fibonacci retracements that create them.  Those are also

harmonic precise patterns.  Day or swing traders

and investors utilize them to anticipate or time the financial market.

 

It is essential that financial market traders learn to master the Fibonacci

patterns to improve their decisions.  Indeed, if one wants to become a

Fibonacci retracement trader, one will learn these patterns because they

generate reliable trade setups. 

 

In all cases, one will use each Fibonacci retracement in conjunction with

the three market patterns. 

 

Check out more about Fibonacci retracement HERE 

 

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