Beyond the Fibonacci extension

I talk about these set-ups on occasion. They are good plays, but the reliability is less than some of the usual set-ups I highlight. Due to their nature, they usually occur later in the day (but not always). And, they are more prone to false break-outs (or break-downs for a short). So, I would give them a grade of "B" going forward. I would warn you to watch your stops closely, but you should always watch your stops closely!!!

Some of you ask what the target is for these plays. There is no set answer - I recommend looking at previous support/resistance to the left of the chart (including previous highs/lows and obvious swing points). Many people calculate the distance from the high (or low for a short) to the Fibonacci extension, and add (or subtract) that from the Fibonacci extension for a new target. Or, you can just watch for a candle to signal a reversal (this is my preferred method).

Today, MMS set-up on the 15-minute chart...and then the bottom fell out. It was a great trade, and it also gave a good indication of when to exit (cover). Here is the chart with entry and exit bars marked.




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Tags:
Trader-X, Stocks, Fibonacci, Trading, MMS