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.
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30 comments:
nice trade Trader X. i did the same except on the 15min and took out a nice chunk of the move.
hope all is well with you and your family.
Nice one X, thanks for the lesson.
X,
Just for fun, I scouted a couple of Beyond the Fib Ext shorts from Friday. Didn't trade them; it's all in retrospect. But interesting!
All on 5m chart, 8EMA, Fibs on PDC to CDO.
WLT - Short break of 3rd bar's low.
ANR - Short break of 11th bar's low.
NEM - Short break of 3rd bar's low.
Admittedly, the tricky part is how to trail the stop! At least for me!
Chips & Salsa
X,
One more Friday Beyond Fib Ext short:
MCP: Short on break of 21st bar's low.
Chips & Salsa
(No, folks, I have nothing better to do on the weekends.)
I'd say ANR MCP were too late in the day set ups. Also like doji and inside bars. Ready for a nap after a long canyob like...battered and bruised.
bl,
Really? ANR set up within the first hour. MCP set up within the first two hours of the trading day.
I guess it all depends on trading style and risk-tolerance. Probabilities can certainly decrease as the day wears on, but I've seen other readers posting successful trades at this time and much later (posts on 11/20, 12/09, 12/21, for example).
I myself have taken trades as late as Noon Eastern and had more success than failure.
But again, your strategies, rules, and experiences may be very different from mine, and I respect your point of view.
Chips & Salsa
@.@ really really nice trade...
X,
Regarding the Beyond the Fib Ext Set-Up:
bl raises a great point about trigger bars, so I wanted to ask for your feedback.
For any Beyond the Fib Ext Set-Up, do you always require a re-test of the Fib Ext after it is initially crossed? I.e., always requiring a pullback before considering an entry?
Or do you ever execute against the very FIRST bar to cross the Fib Ext without a re-test/pullback? Do you ever execute against an adjacent inside bar that prints above the Fib Ext without a re-test/pullback having occurred?
Sorry, I failed to sign my comment/question about trigger bars for Beyond Fib Ext Set-Ups.
Thanks for the help, as always! :D
Chips & Salsa
"Or do you ever execute against the very FIRST bar to cross the Fib Ext without a re-test/pullback?"
Speaking for X, it needs to be a valid candle setup not just a cross of a certain level. On a pullback/re-test, you tend to get a nice hammer or offsetting bar. But be careful buying on just a cross or break of a particular level.
Tom C.
Tom,
Thanks, man. Sorry, I should have clarified. I meant, assuming all other factors look solid, such as a 100% green bar as the first bar, its open price sitting directly on the Fib Ext with a rising 8 EMA beneath it. Something like that. Best to wait for a pullback anyway? (Granted, this is an ideal scenario, and I don't know how often first bars or inside bars set up like this, but I have seen them.)
Chips & Salsa
Chips and Salsa,
Sorry, misread my chart. 11/5' looks good-inverted hammer breaks the FE. Do you trade only after 30 min or 40min into the open??
WBS on 1/18/11
Perfect example of what I was trying to describe.
5m chart, 10th bar
It's the FIRST bar to cross the Fib Ext. That alone is NEVER a reason to trade, as Tom pointed out. In this case, though, the bar opened perfectly at/on top of the Fib Ext, closes at its high, is almost entirely green (small tail below), and is supported by the 8EMA directly under its low.
(Warning: I run two charting software packages, and one shows a bad print on bar 11. The actual low of bar 11 is $22.21, just in case your chart shows the bad print of $22.00, which will also skew where the 8EMA rests beneath bar 10.)
Is this type of trade just as consistent and dependable on the Beyond Fib Ext Set-Up? Or does a re-test/pullback to the Fib Ext yield higher probabilities of success?
Thanks, fellas!
Chips & Salsa
bl,
When I first started out, I waited 30 minutes to an hour before entering any trades. I only traded 30-minute charts. After I was comfortable, I moved to 15-minute charts.
Recently, I have been easing into 5-minute charts, only focusing on a single type of set-up, until I am fully confident with it.
I no longer have any restrictions on start-time. I will take a trade as early as a valid set-up presents itself. But I'm certainly still in the learning phase of this type of trading. :D
Chips & Salsa
X and Tom C,
I'd love to see what trades you took today. The market's day-long downtrend should've been easy for me, but I just botched it. Oh well, live and learn. :\
Any good set-ups you guys took?
Chips & Salsa
@chips and salsa... two things
first, please get a google or open id account, or click name, no more clicking anonymous. i want to see your name right at the top so i don't think it's some random person writing. i love your questions and comments but you are no longer anonymous, you are THE chips & salsa
have you thought about putting your charts up on blogger? i'd gladly stop by and check out all those charts you mention in the comment section.
C&S, on your WBS example, how are you plotting your Fib lines?
Looking purely at the candle pattern,bars 7, 8, and 9 combined form a bullish setup. But I don't have any other context to evaluate it (ie, support and resistance).
Let me know how your Fib lines were plotted.
Tom C.
Joshua and chips and salsa, you can upload your charts to imgur.com for free and post the links here.
roger,
i never heard of that site. i just tried it and it works fast. i think it will be a great idea for the comment section.
joshua
I am looking for a link to trader X's e-mail so I can get the Fibonacci calculator. Does anyone know what it is or where I might find it? Thanks!
Tom C,
Oops, sorry, man! WBS Fibs were from previous day's close to current day's open, 5-min chart, 8 EMA on 1/18/11. Bar 10 is trigger bar. Bar 9 as trigger bar could have also provided a more aggressive entry, but I don't know how acceptable bar 9's candle pattern is to the criteria of the blog. Thanks, man! I appreciate your opinion!
joshua,
I'll create an id and check out Blogger this weekend, for sure. Thanks for the recco! And thanks for the honorary "THE" before my title, lol.
Chips & Salsa
@melissa. your best bet is to ask here in the comment section, no emails
the fibonacci lines are automatically plotted using software such as quotetracker, ninjatrader, real tick, etc...what are you looking to do, plot the lines lines like X?
Thank you for the response, Joshua. Since I left that comment, I discovered that feature in QuoteTracker. Duh!
I purchased the Trade the Move manual and have spent the last few days reading all the charts and comments for the past two years. It's a lot to take in, but I placed my first trade on Friday based on my newfound knowledge (after months and months of losing).
Let's see if I can get the wording right.....10 min chart, Fibonacci plotted over opening high and low (first 30 min). Shorted below the 50% retracement when support didn't hold. Covered at 42 when it didn't break through that level. In retrospect, I think I should have looked for a bearish candle to support the entry....maybe there was, but I'm just not sure. Hopefully I didn't just get lucky. Lol.
At any rate, thanks to X, etc. for sharing their knowledge. I will keep on keeping on....
Hi Melissa, what was the stock/symbol for the trade you referenced?
The tradethemove.com manual is nice, it opened my eyes. I consider that the undergraduate and X's blog the master degree in trading.
melissa, try using that imgur website that roger suggested. i think it would be neat if we can start getting some charts linked right in the comments.
Sorry guys....I got it all wrong. The stock was PLCM, I shorted at 44.5 at the halfway point between the high and 50% retracement, and covered at 43.
Joshua, I took your suggestion about imgur....let's see if this works. Here is a chart:
http://i.imgur.com/X6k0P.gif
Melissa, just my .02. I try to avoid stocks that have some an erratic, wide range first bar. Price for the rest of the day tends to get caught in a range within that bar. Next, be careful shorting a gap up. You are going against the odds. It can be done successfully, but you will lost a large percentage of the time just due to the fact that you are shorting a strong stock. On the plus side, you did a great job recognizing the support at $43 and covering for a profit. Many experienced traders would have been stubborn and ignore that, and let a profit turn into a loss.
If you are new, I suggest shorting gap downs on a pullback and going long gap ups on a pullback. Also, when you plot your fibonacci lines, try using price action from the previous day if you are using a longer-term (10 minute chart). It gives you more to work with. For example, over the previous day's low to the opening days 30-minute high. Experiment and see where the most setups appear for you.
Again, just my .02!
Thank you for the advice, Taylor. It makes sense, and I will take it to heart.
Here is what I did today. I plotted the Fib lines as Taylor suggested (low of yesterday to high of today's open). Bought NVDA at the high of the 3rd bar after it gapped up and then pulled back to the halfway point between the high and 50% retracement with a hammer (although, again in retrospect, I maybe should have waited for a more "inside bar?"). Held until it crossed the 8 EMA around 24.85.
Here is the chart:
http://i.imgur.com/4YMjt.gif
Nice trade Melissa. Did you mean when it broke the third bars high? The only thing to watch out for is a reversal at the morning's high which is resistance at this point. But if it breaks through, you are setup for a nice run as was the case here.
Ed, that's right....a break of the third bar high. I was watching that level, but it went right on past it, thankfully.
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