Practice Session
If you’ve read this commentary for very long you already know I didn’t trade today. If there are no clear trades in the first hour and the range is small, I wait until it looks as though we are breaking out from the early range before trading. No potential breakout — no trade.
But whether trading or not, marking up charts with the potential Fibonacci turning points is good practice. In a narrow range the same patterns still appear, and the more screen time you can put in, the more of the setups you will catch in real time
However, when the market decides not to go anywhere it seems to like reversing at 78% and/or 89%. Maybe those larger pullbacks are just another way of showing a lack of direction.
Notice the nice Fibonacci cluster marked with the yellow “A.” The blue A-B-C turns at the 62% extension just as the smaller red A-B-C does the same. And that happens just as we retrace 89% of the morning drop. Add a nice Stochastic divergence and you have an excellent trade setup. Now all we need is some range.
Hello there, do you mind if I as what product that is you are trading ? It seems you are familiar with ElliottWave technology.
You mentioned that A retraced at 62%, but where did you take that one ?
Hello Kaori,
I’m trading the Russell 2000 e-mini futures and commenting on the market’s movements each day. Although I have traded Elliott Wave, I actually only use Fibonacci ratios, trendlines, and chart patterns for this web site.
When the first hour of trading does not produce any trades, I will usually wait for a breakout. On this day there was no breakout. The 62% you see marked on the chart is not a retracement, but a Fibonacci extension. The distance from B to C is 62% of the distance from X to A. A pivot at that point usually leads to a reversal. You can see that happen several times on this day’s chart.
Hope that helps.
Lowell