FibCalc Examples

The opinions expressed in this column are based on how I interpret Events, the Market, and the Charts -- unless otherwise noted --  and are not recommendations to buy or sell securities. Trading stocks involves risk. Never put your money on the line without a thorough understanding of what you are doing, and why you are doing it, based on your own personal experience. No Chart Pattern works out the way we think it should every time,  so it is vitally important to have a protective Stop-Loss and/or Exit point planned before entering into a trade. Do your own research and testing before attempting any of the techniques discussed in my columns, materials, courses, or emails. I cannot be held liable for any trading decisions based on any information obtained from me. - Rick LaPoint

Real Examples from the Market

UpTrend Retracing Down

DownTrend Retracing Up

Lesson: 50% Phenomenon Theory

50% Phenomenon Down

Pivot Dates by Ratio

DownTrend Retracement

Bobby wrote in to ask about trading the QQQ. So here is the 5-minute chart from Thursday. I'm writing this Saturday morning. Friday was the day before the Labor Day weekend, and may not be representative of a normal day. The chart below illustrates several things I wanted to show. 

Let's take the last little high from Wednesday and the first little low of Thursday morning as our Foundation. We are looking at the Black Labels on the chart below. Right off the bat we are spanning 2 days with the intraday chart. We input our High of 37.56 and our Low of 36.64. Then Price starts moving up. Remember that we are working with a Downtrend , so the Bounce Point will be a Resistance area.

We see a candlestick hitting a high of that 5-minute period and having trouble sustaining the momentum. FibCalc tells us that Price has hit the .786 Bounce Target of 37.36, although the Actual of 37.31 is off by .04 cents. Close enough.

When Price began to rise off the Low, we could have gone Long, or covered an existing Short. Let's say we went Long. Now we hit the Bounce Target and it's time to exit with our Profit. Now we go Short. We look down at the Profit Target Prices under the .786 Bounce Column for possible spots to cover our Short. We hit our Profit Target of 36.64 , which falls in the .786 Row. It's just coincidence that the Bounce Column and Profit Row are both .786. Our Actual is off by .05 cents at 36.69. 

But wait! Let's say we decided to sit through some wiggle to see what would happen. No rush to take Profits just yet, as we have some room before Price rises high enough for us to consider an exit or stop-loss. Price rises to that Blue 37.00 on the chart, where it finds Resistance, and then falls all the way to the Profit Target 36.09 -- Row 1.382 . We are off by a penny with an Actual of 36.08. The candle makes this point look "iffy" so we decide to cover our Short for a nice Profit.

Continuing with the chart above we will turn our attention to the Blue Labels. Let's say we Input a new High of 37.00 and a Low of 35.75. We get a .500 Bounce to 36.38, with an Actual of 36.44 -- off by .06 cents. Very close, so we decide to go Short again.

Looking down our .500 Bounce column, we hit the .236 Row  Profit Target of 36.08 . Actual is off by .02 cents at 36.06. We can cover our Short here, but we decide that since we are in the money for the day, we will give this some wiggle. Waiting was good to us, we hit the .382 Row Profit Target 36.90 . The Actual is 36.08, so we are off by a penny.

I hope this has been helpful. As you can see, there are several ways to interpret and play any given scenario. Even though FibCalc can give you the Fibonacci probabilities, it remains up to the Trader's personal experience and Risk Profile to execute his or her final decision.

Here is the 1 minute chart. See the initial fall, which was nasty all by itself. Then we Retraced back up about 50%. This is the first (Blue) line set. Then I cloned that line set and pasted in the Black line set. From that first 50% Bounce we fell another 100%. Ouch. We managed to Retrace upwards 38%, before plummeting ANOTHER 100% with our 3rd line set, also a clone.

We get the following numbers, if only using the first Bounce as our Target Criteria: