first Fibonacci level at an exact Fibonacci time extension point

EXAMPLE #4








Example of 5 min chart with our Pro Chart Fibonacci Tool. Stock ADBE (6/05/2001)

Here is another example. The stock makes a very nice rally and retraces to the first Fibonacci level at an exact Fibonacci time extension point, and resumes its strong trend. A key to using Fibonacci retracements is to gauge the strength of the original move. If it is a large thrusting move with small or NO pullbacks on the way up, odds are that the first Fibonacci level will hold. If it is a gradual move with many stops and starts, the first Fibonacci level is less accurate. In these cases you should wait to buy or sell short until after the level appears to hold. In the example above, because the rally up is so strong, and the pullback coincides with a Fibonacci time extension, there is a higher probability that this pullback level will hold. There are two ways to trade Fibonacci levels. You could take the trade with your stop immediately under this level and hope the level holds. Or you can wait for the level to hold and buy a breakout of the high of the previous 5 min bar for example. Here your stop loss would be farther away from the price you are filled, thus you are risking more, but the odds are higher that the trade will work.

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