Most of you seem to really like the 5-minute charts, so along with the 2-minute charts I have been trading, I have been keeping an eye on the 5-minute timeframe as well. This morning ZMH provided an interesting setup.
Based on how I normally plot my Fibonacci lines - from the previous day's close to the current day's open - there were several positives and negatives:
1.) Positives - gap up, nice rally in the first four bars, an orderly pullback, and a nice hammer-type candle at the rising 5EMA.
2.) Negatives - I would have preferred the pullback to end, and the hammer candle to form, at the Fibonacci extension (FE) as opposed to a distance above it. And, if you took an entry on a break of the hammer candle's high, you were entering below a whole number ($64). So you had the potential to run into that level and get a quick reversal. It is worth noting, however, that price had previously penetrated the $64 level.
Now for a slight tweak, which I often do in my analysis. When you plot your Fibonacci lines from the morning's low to high (high being the point prior to the first substantial pullback), you will see that the pullback ends and the hammer forms right on top of the retracement zone (RZ). When viewed with those parameters, this is a textbook setup. I entered on a break of the hammer candle's high (sixth bar, if you are counting), and watched the $64 level and the previous morning's high for resistance. Price rallied through both of those levels and continued to the FE. My exit was $65. A nice trade that yielded almost 2% in less than 20 minutes.
Both charts are below in the order that corresponds to my notes above. Please note that due to some feedback in comments, I have tried to adjust colors to make the charts easier on the eyes. I may tweak them more in the future, but here is the current layout:
5EMA - black line.
8EMA - yellow line.
100EMA - blue line.
The "trigger bar" is marked with a blue arrow.
The Fibonacci lines are all white - the highest and lowest lines are what I refer to as the "Fibonacci extension" (FE), the next highest and lowest lines are the high/low of my chosen timeframe, and the middle three lines are the "retracement zone" (RZ).
Trading 27-April-2016 (+ $66)
22 hours ago