When we dropped right from the open, you had to look at yesterday’s data to find a possible reversal point. Realize that I’m not talking about a trading setup, but just the normal checking and cross-checking that occurs all day long as you try to listen to what the market is saying. 
We bounced at the 100% Fibonacci extension level, but it didn’t hold. The extension levels, once again, are just a ratio of the previous move in the same direction — the most common being 0.618, 1.00, and 1.618. For simplicity I’ll often refer to them as 62%, 100%, and 162%. If we go further, the next levels are 262% and 424%.
At point #4 the 162% level was hit precisely, and as shown by the moving average, we started moving sideways, eventually forming a triangle pattern. It can be tricky to trade inside a triangle, and in this one the Fibonacci relationships didn’t work very well. But eventually the triangle broke to the downside.
Recently all the breakouts I’ve written about have been up, and I’ve made a point of saying that low-volume breakouts will often be failures. That’s not true with downside breakouts. Many of them will occur without an increase in volume, and that’s what happened here.
By the time a triangle breaks out, you should have drawn the parallel trendline. That’s your expected target, and quite often the market will reverse at that point. Today it decided to go further. We bounced off the target at point #6, but instead of going higher, we turned down again from point #7.
After pulling away from #7 you can draw the upper blue trendline, and then its parallel. Notice how the blue parallel contained the rest of the move. Where did we finally reverse? The 162% extension of the move from #3 to #4 almost exactly matched yesterday’s low (red line.) Price exceeded it by a few ticks, reversed, and broke the channel to the upside to finish the day.
