No reader trades this week, so here is one of mine from yesterday.
NVLS gapped up, broke through the Fibonacci extension (FE), and pulled back to test that level as support. The fifth bar formed a nice hammer closing above/on top of the FE, and the sixth bar was the narrowest range of the morning. In addition, the FE was a few cents above the whole number ($34), so the fifth and sixth bars also closed above that level providing additional bullish confirmation. The only negative about the trade was that price was a little extended from the 8EMA when I entered on a break of the sixth bar's high.
Note - while the stop is almost always the opposite extreme of the trigger bar, in the case of NVLS I placed my stop at the fifth bar's low. The sixth bar (trigger bar) was too narrow range, and it would have been easy to get stopped out (though, in hindsight, it never broke the sixth bar's low).
In the previous comments, someone asked how I determine a target for the "beyond the Fibonacci extension" setup. It is more of an art than a science, and there are several factors that I consider. I take the distance between the high and the FE, and add that to the FE as the first target. I look for whole numbers and the halfway point between whole numbers for both targets and resistance/support for a continued move. And I watch for bearish reversal candle patterns.
In the case of NVLS, I was watching price to see if it could make it to $35, which was my maximum target. It made a nice move up to $34.88, and then pulled back. But the pullback was orderly - had it broken below $34.50, I would have closed my position. But price formed a hammer above that level and rallied to $35. It continued on for another $2, but I was happy with my ~3% gain.
I marked the $34 and $34.50 levels with a horizontal, black dashed line for easy reference. My Fibonacci lines are plotted over the previous day's close to the current day's open, and are marked in white. Also note, a break of the fifth bar's high was a valid entry, but I missed it.
Trading 27-April-2016 (+ $66)
22 hours ago