The market set up some clear channels today, but the internal Fibonacci measurements within those channels still left something to be desired.
We opened with a small pop to the upside and immediately reversed. When the market bounced from yesterday’s low I was looking for a Fib retracement, but the market didn’t cooperate. Breakout traders could have taken the drop through that low as an entry since the pullback showed a nice decrease in volume.
The channel held through the bottom at “A”, but the reversal didn’t quite match a Fib structure, so the turn was signaled when we broke the trendline to the upside. I expected another leg down at the question mark, since the smaller pattern inside the channel formed an a-b-c Measured Move. Fortunately I couldn’t find any other reason to take a trade there.
We got to the reversal at point “B” about 15 minutes before the Fed released their minutes, so even with a nice 62% Fib pullback and the resistance of a good downtrend line I decided not to trade.
Again the market formed a channel with the final bottom occurring right at the 127% external retracement of the A-B move. Often trendline channels will give you entries, but sometimes, like today, they only point out potential exits.
