Tag: stock chart analysis

Strategy for riding the rising stock at the near bottom

This time how to ride the rising stock at the near bottom using Fibonacci extension and fan line. This can also explain how to attack major target levels of Fibonacci extension like 61.80, 161.80 and 261.80%. Please be noted that do not enter at 423.60% level!

See below chart and check circled spots.

netflix chart

The first job is drawing Fibo extensions and Fibo fan line connecting low and next low point. This is the low to low connect method. Also we can use continued price high to low connect method like fibonacci retracement. Will explain this at next posting.

Rising of stock price means going over to the upper level of Fibonacci extension. Normally the upper level will act as a resistance point. There are three ways to breaking up this level.

1) Simply going over 61.80% => Fast shutting up, so will likely go back to 61.80% or under because of no supporting. Not recommend to enter
2) Go over 61.80% with Fibo fan line => Will be OK. Continuing Fibo fan line or 61.80% level will be a base line for profit cut or loss cut.
3) Go over 61.80% with Fibo fan line and Simple Moving Average(SMA) curve => 100% success! Continuing Fibo fan line or 61.80% level will be a base line for profit cut or loss cut.

Like this, we can apply combination of Fibo indicators and SMA curve to figure out the optimal enter point. Please see three circled spots on 61.80% and 161.80% level on above chart. The end of one white candle went over upper target level and we can see SMA curve or/and Fibo fan line is placed on the white candle in a cross up or push up configuration.

When looks stock is rising from bottom, just wait. This can be a bull trap. So just wait until it will reach 61.80% level. And then checking is there any Fibo fan line or SMAs on the white candle which is ending up at the over of 61.80%. If yes, go enter and enjoy.

Where is the start point of Fibonacci extension and fan lines

The most difficult thing about the stock chart analysis is that the results vary greatly depending on the reference point. Because the stock signals are very delicate, misapplication of the reference point can lead to large errors in interpretation. Good standards can give good results. However, bad or ambiguous standards only add to the pain of analysis. Many stock traders have spent a tremendous amount of time and effort trying to find those standards. As one of them, I also spent a lot of time in standardizing the Fibonacci technical analysis. I am working to increase the certainty of the analysis.

Generally speaking, the starting point of Fibonacci extension is to use the lowest point of the chart regardless of time frame. And one more thing, the ideal lowest point is starting from under SMA20, SMA100 and SMA200 curves. If the lowest point on the screen is placed above the SMA lines, try not to create a Fibonacci extension. Charts on the screen you use vary greatly in time frame. For example, from the 5 Min/Day to the 1 Mon/10years. If we start anywhere from the lowest point on the chart, we will see a lot of extensions, and the screen will be really dizzy in our view.

The chart below shows the Fibonacci targets by linking the minimum and maximum values of each stock wave ​​from the last 10 years to the last year 2017 in yearly base. This is so complicated that no body like this.

apple chart

Let’s see that start at the point under SMAs. The following chart is the past five years.

From this below chart, we can get an idea that the maximum value from this extension is 229.96. And we can find another dip point on February 2018. Let’s make related Fibonacci extensions for this.

We can get an idea that the bottomed line of Fibo fan can be a defense point to the recent falling. In this way, it is much simpler to do Fibonacci analysis on any time line chart using the start point under the SMA curves. Even small time frame like 1 Min or 5 Min chart, we can apply this concept to those chart and this may better than any starting point which is placed over some SMAs.

Establishing a clear standard of chart analysis is a way to win in an uncertain market.