Trading What I See

It’s nice to end a trading example and have everything work so precisely. Not only did we hit and reverse at that 262% Fibonacci target I mentioned yesterday, but we did so at a logical time interval. Before I explain, a quick message.

I’ll won’t have computer access for a few days. Hope to be back online by Monday. In the meantime — Good Trading.

Lowell

The first chart today is just the completion of the patterns shown yesterday. As expected, we reversed right at the 262% Fibonacci extension, completing a nice A-B-C move. What I’ve added is a timing signal that I mentioned once before. In a triangle pattern, there is often a reversal just at the time that price reaches the apex of the triangle.

Like many other things I follow, I never trade this by itself, but as you can see in the example, Time and Target matched up exactly. Sometimes it is just a big bounce, and sometimes an actual reversal. Because of declining volume on today’s rise, I think this time it is probably just a bounce.

Since I won’t be commenting for several days, I’m including a Daily chart that shows some potential problems. You’ve just seen an example of the power of a 2B reversal. If you need a refresher, check this earlier post, or buy Trader Vic’s book from the link at the end of this post.

On the Daily we broke a well-established uptrend on February 27th. I’m sure you remember that day. We’ve spent the last two months trying to regain the earlier peak, and as soon as we did, the breakout failed. I prefer a cleaner top, but that certainly looks like a large scale Trader Vic 2B setup to me.

And the entire rise from the bottom in early March looks like a rising Wedge that broke down yesterday. If it is a wedge (and remember I don’t try to make predictions) the initial target could be around 760.

But the nice thing about day trading is that you can use these longer term patterns as general guidelines without becoming commited to any one direction. Do as I do and just trade what you see — one trade at a time.

Victor Sperandeo: Trader Vic - Methods of a Wall Street Master