back start next
[start] [1] [2] [3] [4] [5] [6] [7] [8] [9] [10] [11] [12] [13] [14] [ 15 ] [16] [17] [18] [19] [20] [21] [22] [23] [24] [25] [26] [27] [28] [29] [30] [31] [32] [33] [34] [35] [36] [37] [38] [39] [40] [41] [42] [43] [44] [45] [46] [47] [48] [49] [50] [51] [52] [53] [54] [55] [56] [57] [58] [59] [60] [61] [62] [63] [64] [65] [66] [67] [68] [69] [70] [71] [72] [73] [74] [75] [76] [77] [78] [79] [80] [81] [82] [83] [84] [85] [86] [87] [88] [89] [90] [91] [92] [93] [94] [95]
15 When a stock forms a bearish price bar at the .618, as Dell did in the previous example, the price action must be watched closely. In this instance, the following day provided significant confirmation of the trend reversal because Dell broke the prior days low and closed below the prior days close. This continuation following a clear reversal off a Fibonacci number would have signaled that this stock started a new bearish down trend. This reversal yielded over 10 points in the next two weeks. .618 Channel In my experience, a stock that reverses off a .618 is very strong. In an uptrend, .618 reversals usually signify a positive continuation, especially if the initial upswing is a strong move. Conversely, in a downtrend, .618 reversals suggest the continuation of that negative move. Lets look at some illustrations and examples. .618 Bullish Channel  bullish channel: support at .618 retracements It is very common to observe .618 retracements in clearly defmed channels. Channels are trending ranges that maintain a consistent slope of
an angle. When Fibonacci numbers and pattems complete near an extreme range of a channel, you should be aware of such potentially powerful implications. For example, lets say you are following a strong uptrend. A clear channel has developed in which a stock has traded within an increasing trend range. A potential opportunity develops when the stock sells off to the low range of that trend channel. Knowing that the stock has found support at the .618 retracement of the prior rally, a potential trade set-up exists. The lower trend channel that serves as potential support can validate the trade set-up. In this example, it would be even more advantageous if the .618 retracement was located just below that lower trend channel. Often, strongly trending stocks with obvious price channels will briefly break through the lower end of the range "to shake investors out" of a good position before heading higher. When this set-up occurs and the .618 retracement is just below the trend line, the opportunity will not require much of a stop loss limit - maybe a point or two below the .618 retracement - to see if the trade will work. When a stock breaks through its lower range of the uptrend channel, it should "reveal itself rather quickly. Usually, if it is a shakeout, the price action should reverse quickly. However, if the ride is over and the uptrend channel will not continue to go higher, the price action should have downside follow through, where the stock continues to head lower. Ifthe "breakdown" is valid, waming signs, such as gaps, wide price ranges and tail closes, will indicate the strength of the move. Therefore, if the stock breaks past the trend line and the .618 considerably, you will know that these points are no longer providing support. So, you close out your position and take the loss. Lets look at an example of a bullish uptrend with .618 retracements. The following chart of Eli Lilly clearly illustrates this situation. The stock established a very bullish uptrend that found support at the .618 of the prior rally every time it attempted to sell off This daily chart clearly shows price action that is literally bouncing off the .618 in this channel. You could have followed this uptrend, waited for a sell-off and bought every time the stock retraces to the .618. There were several times when Eli Lilly sold off past the lower trend line and reversed at the .618. When these situations occur, you know that your risk is very limited. Since the stock violated the lower trend line, the .618 is the only potential support. If the stock breaks past the .618 retracement, you can assume that
the uptrend is no longer intact. therefore, you only have to risk a point or two below the .618 to see if the reversal will occur. eli lilly (lly): daily .618 bulush channel  volume - ©bigcharts.Mm  10.0 apr hay jun jul fiug sep oct nov dec 99 feb tiar in this situation, since a .618 bullish channel has been observed, there is a high probability that the trend will continue. in fact, eli lilly provided five opportunities to capitalize on this set-up. the most recent retracement bounced off the .618 retracement of the prior rally, although it did not retest the lower range of the channel.
[start] [1] [2] [3] [4] [5] [6] [7] [8] [9] [10] [11] [12] [13] [14] [ 15 ] [16] [17] [18] [19] [20] [21] [22] [23] [24] [25] [26] [27] [28] [29] [30] [31] [32] [33] [34] [35] [36] [37] [38] [39] [40] [41] [42] [43] [44] [45] [46] [47] [48] [49] [50] [51] [52] [53] [54] [55] [56] [57] [58] [59] [60] [61] [62] [63] [64] [65] [66] [67] [68] [69] [70] [71] [72] [73] [74] [75] [76] [77] [78] [79] [80] [81] [82] [83] [84] [85] [86] [87] [88] [89] [90] [91] [92] [93] [94] [95]
|
Menu
