|
|
|
Mikula Forecasting
Company: Trading Strategy #7
====================
Written by: Patrick Mikula CTA
Copyright (c)2003-06 by Patrick Mikula All Rights Reserved.
(Please to not copy or foreword this article).
Mikula Forecasting Company
P.O. Box 152672
Austin, TX 78715-2672
USA
www.MikulaForecasting.com
support@MikulaForecasting.com
====================
The technique described in this article will use the
Fibonacci sequence. The Fibonacci sequence will be used to
calculate retracement levels of market swings and range
extension levels for finding pivot price levels. The
Fibonacci numbers used with this technique will be 0.382,
0.618 and 0.786. The numbers used for range extensions will
be 138.2, 161.8 and 1.786. Higher increments of these
numbers such as 261.8, 361.8, 461.8 will also be used. The
origin and calculation of the Fibonacci numbers will not be
discussed here in this article.
First Example:
The first chart below shows the stock symbol GE. The range
selected in this example runs from the low identified by the
"0%" horizontal line and the high identified by "+100%"
horizontal line. As the market moves up from the pivot
bottom at the "0%" line, the Fibonacci retracement and
extension lines are draw on the chart with the MarketWarrior
"Fibonacci Range Extension and Speed Line" tool. The chart
below shows a horizontal line marking the +38.2%
retracement, +61.8% retracement, +78.6% retracement, +138.2%
range extension and the +161.8% range extension. After the
bottom at the "0%" line the market moved up and made a top
at point A right on top the +138.2% Fibonacci range
extension level.
Second Example:
The next chart shows the daily chart for the stock symbol
GM. The MarketWarrior "Fibonacci Range Extension and Speed
Line" tool is used to drawn the lines on this chart. The
range being used runs from the "0%" horizontal line to the
"+100%" horizontal line. The range retracement levels seen
on this chart are +38.2%, +61.8% and +78.6%. There is one
Speed Line drawn on this chart. This is the diagonal line
that cuts across the chart from left to right and is the
+38.2% retracement speed line. After the bottom at the 0%
line the market moved up to the intersection between the
+61.8% resistance line and the speed line. This intersection
is identified with the letter A. When the price reached the
intersections of these Fibonacci lines at A the market rally
ended.
MORE:
To see more patterns and setups see the
version of this article on the MarketWarrior
owners page.
|
Mikula
Forecasting Company: Trading Strategy #7