On this first full weekend of Summer, we thought we would revisit our June 3, 2019 research post regarding a price pattern we love to trade – the Fibonacci Extension Bounce. This pattern sets up fairly often and the key to understanding this pattern and where these trades present real opportunity is in understanding the price dynamics behind these extensions. There are many instances where a Fibonacci price extension level will fail to promote a price bounce or rebound – and the price will just keep trending higher or lower past the extension level.
You can read our original research post here that clearly shows the bottom and our price targets.
Pay very close attention to the price levels and setups of
the charts within that June 3, 2019 post.
These setups are based on what we term a “100% Fibonacci Extension” from
a previous trend reversal (peak or valley).
The concept of this trading pattern is that the initial “impulse” price
move sets up the first leg of a move.
The retracement price move sets up the entry trigger for the second
price leg – the next 100% price leg. The
bottom, in this case, of the second 100% price leg sets up the “end of the
move” and the potential for a price rotation in the opposite direction (likely
resulting in a 38% to 61%+ retracement move).
In both instances of our June 3 calls, Crude Oil and the ES
followed-through exactly as we predicted.
This first chart of Crude Oil shows how price bottomed near $52 and has recently advanced to levels near $58 after reaching the 100% Fibonacci extension levels. As this move higher extends to levels near the ORANGE moving average line on this chart and/or beyond the $58 to $59 target level we originally drew on our June 3rd charts, we would consider the upside price move “completed” based on our expectations. Yes, these types of trend could extend even further beyond our expectations. But our objective, as skilled traders, is to target and profit from the highest probability objectives – which was the move from $52 to near current price levels.
Follow the MAGENTA lines on these charts to see the Fibonacci
Extension Pattern Setup. They are not
hard to see on the charts when your eyes are trained to identify them.
This ES Daily chart shows the incredible +230 point rally
that took place after our June 3 research post and after the Fibonacci
extension pattern completed. It is
really hard to miss the opportunity with a move like this. Again, follow the MAGENTA lines on this chart
to see the Fibonacci Extension pattern setup.
At this point on the ES chart, the upside price rally has
resulted in a 161% (roughly) upside price advance of the previous Fibonacci
Extension pattern (last leg). This
upside price leg range, 161%, suggests the upside price move should be close to
ending soon. There is a possibility that
price could advance to levels near 200% of the previous price leg range, but
traders would be chasing a 25% further upside advance that may only be a low
probability outcome.
Our advice for skilled traders is to pare back existing open
long trade positions near these new all-time highs. The price advance appears to have reached
levels that suggest the upside advance may be nearing an end point for the US
stock markets. After such a big upside
price leg, we have to be cautious near these new all-time highs that further
price rotation may become a concern.
Oil, on the other hand, could continue to rally because it has only advanced 61% of the last Fibonacci 100% price leg. The global concerns regarding Iran and the US, as well as global economic concerns, could push Oil back up to the $60 to $62 level before reaching a peak.
Over the past 21+ months, we’ve highlighted some of the best
tools and techniques we use to find great trading signals. This one
technique, the Fibonacci 100% Price Expansion Leg, is just one of the tools we
use to find trades and targets for our trade alerts for members.
The more one understands how price works and how the markets
operate as a Symphony of price actions, one can find opportunities for great
trades almost all the time. Skill and experience make the difference when
deciding when to trade and what to trade and that’s what we provide.
More eye opening charts
on currencies and gold here
We’ve now shown you two different price setups using Fibonacci
price theory and the only thing we have to do is wait for a technical price
confirmation before finding our entry trade. We’ll see how this plays out
over the next few days and weeks. Remember, we are not proposing these as
“major price bottoms”. They are “upside pullback trades” (bounces) at this
point. A bullish price pullback in a downtrend.
