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
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Saturday, November 27, 2010

Friday's Fibs

Wednesday's session of the SPY showed a real body 2x greater than the previous day (2x-bar, indicated on the chart below by the teal paint-bar).  With that in mind, we look for the midpoint of that previous bar to act as a support or resistance level.

The High/Low of Wednesday worked out to be very close to the Open/Close prices.  So whether you used the High/Low or Open/Close for your Fib. measurements the difference was marginal (3-cent difference).

The price gap down on Friday was very close to the previous day's Low and Open.  It also closely corresponded to the 50% level as measured off of Tuesday's Low and Wednesday's High:

  With such a wide gap down (momentum) we can draw Fib. lines based off of the previous day's Close to Friday's Open.  In this case, our 50% mark was at nearly the same area as our 2x-bar midline and our previous day's High/Low 50% range, but what ultimately capped off the gap-fill attempt was the 61.8% retracement level:

If we consider the gap down Open as our initial momentum impulse we can look for price to make a measured move of this initial impulse.  In this case, Friday hit the 50% extension to the penny.

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