Trading What I See

Getting acceptable Fibonacci measurements at futures contract rollover can sometimes be problematic. For longer measurements, do you use the old contract or the new? There is always a gap at rollover, so the measurements won’t be the same.

Yesterday I had a nice 423% external retracement marked on the 15 minute chart for a potential reversal. Today, using the new contract, that measurement is off by about a point and a half. On the 32 point move that was being measured, that comes out to just under five percent.

My solution, for what it’s worth, is to try to base my new contract trading on very short term measurements until the weekend. You decide whether that potential reversal worked or not.

Today we started with a quick double fake-out — up, down, and then the rally. The move created a Spring entry combined with a 127% retracement of the quick upmove. After moving to what would later be labeled “A” there was a 50% pullback which eventually turned into a double bottom.

A trade at the first bottom probably would have been a loss (unless you left your stop below the pivot.) The second bottom (perhaps a re-entry) lead to a nice rally. Both the parallel trendline and the Measured Move pointed out the top at “C.”

Using the “First Pullback” measurement technique that I’ve illustrated several times this week (white lines), today’s top was at a 262% external retracement. The four external retracements I watch for are 127%, 162%, 262%, and 423%.

A fake-out reversal usually comes at 127%. A general reversal zone exists between 127% and 162%. When we pass 162% I watch for a normal move to 262% (as happened today.) And if there is a very strong move, there is often a reversal at 423% as shown yesterday.

Has this move topped? There wasn’t a divergence or a 127% move from the previous peak. But we did turn inside the reversal zone. And we have reached 262%. Not enough agreement to give me any type of bias. As usual, I’ll wait for Monday’s open and see what the charts say then.