Fibonacci Clusters
The more Fibonacci measurements I can find for a pivot point, the better I like the possibilities for a trade. Today’s bottom pivot gave quite a few.
We started the day with a sideways movement, and although the reversals look good now, it wasn’t until the small red “c” that the first setup occurred. Any time I have an up-down-up movement I’ll check the Fib measurements looking for 62%, 100%, or 162% reversal levels. As we hit each level I’m watching for confirmation of a potential turn.
There was a confirmation as the pullback stalled at the blue downtrend line, but if you’ve followed me for very long you will understand why I passed that short sale. We had reached the end of the first hour of trading, and it looked like we were stuck inside the morning range. That usually leaves me watching.
The drop moved to the parallel trendline, as it should, and there we got multiple signals as various Fibonacci measurements lined up at the day’s low. There were five reasons for a long entry.
(1) It was a 38% pullback of the rally from the bottom pivot. (2) It was a Measured Move (the blue A-B-C equals 100%) from yesterday’s top. (3) It was another small a-b-c that again ended at 62%. (4) The previous move had reached its target by touching the bottom of the trend channel. And (5) there was a clear divergence in the Stochastic oscillator.
Did this mean we had to go up? Of course not. But it was easy to place a close initial stop right below the pivot bottom, and to then trail a stop below the blue moving average. It’s too bad today’s range was so small, since that trade captured almost all of it.
