I traded AIG short this morning after it snapped back to test the previous day's range.
Some interesting Fibonacci levels provided interesting pivots for the day's trading.
The following chart is a bit crowded, but I tried to clean it up by taking out all Fib. levels that didn't have any bearing on this example.
The 3 Fibonacci measurements are based on 3 time frames in a way:
- the larger time frame; It's important to see where the current price is trading relative to the previous day's range. So, I put a Fib. between the previous day's high and low. Going into today we want to see what levels are acting as Support/Resistance. In this case, the 50% retracement holds on the open (and later at the lows). Provided a target as well.
- the intermediate time frame; Measured between the Previous day's swing high and the opening low. The upward test at the open failed the 78.6%, giving us a lower high. Look for weakness of consolidation before testing those highs again.
- the Shorter time frame; Measured between the opening low and high extremes. Not entirely necessary in this case, but it's fun to check for confluence levels. In this case price held above this 78.6% level while barely testing the higher time frames 50% level.
Anyway; the arrow down is entry short, arrow up is exit, horizontal line is entry price, with a stop $0.25 above.
Going into tomorrow we should look to see how price tests today's highs. A test of $32 wouldn't be out of the question, but it looks pretty weak right here. $30.50 provided support these past two days, and wile price bounced off this level yesterday into the open, when tested again it had a much weaker bounce. On the daily, price consolidated into a 3-bar triangle (lower high than the previous two highs and a lower low than the previous two lows). This pattern tends to respond in a similar way to the nr7 "coiled spring." For further support on the downside check out my previous post on the matter.
The setups I include on this blog are used in conjunction with the 3/10macd and the criteria I ascribe to it as a way to alert me to an existing condition of price. The key concept to take away from this blog is that I try to anticipate what will happen on the higher time frame by using a faster time frame to trigger the trade setup. I do not trade a "system" I use two indicators to clue me in to price conditions. Please read the Disclaimer located in the sidebar of this site. I can be contacted via email at firstname.lastname@example.org
I am always open to questions, comments, or suggestions on how to improve this blog.