Hindsight And Foresight
If you look at the daily
chart of the Nasdaq Composite Index below, it clearly tells us the
market is heading down. What I want you to focus on is where I circled. If you
pay attention to those daily bars inside of the circles, they look bullish.
Their closing levels are near the top of the daily ranges and sure look ready to
break out of the channel. Now I want you to look at the bottom of the channel
where I put arrows. Can you see what I’m looking at? Those two daily bars look
so bearish. Their closing levels are near the low of the day and appear ready to
continue lower in the next trading session.Â
As you know, to draw a line you need
to have at least two points. That means it is impossible for for you to sell the
stock at Circle A and to buy at Arrow #1 if you are relying on your trading
decision based on the channel. So, what kind of traders anticipated the market
reversal at Circles A and B and also at Arrows # 1 and # 2? I don’t want to
mention this name anymore, but the answer is traders who know Fibonacci
retracement levels.
Circle A is the 50% retracement of the January 24 high to the April 4 low, and
Circle B is the 61.8% retracement level of the May 22 high to the June 20 low.
Arrow # 1 is the 38.2% retracement level of the April 4 low to the May 22 high,
and Arrow # 2 is the 50% retracement of the same period.
I have to say this Fibonacci thing really begin to amaze me.
Till tomorrow,