Fibonacci Trading

If you are interested in Fibonacci trading, check out Stephen Pierce's Fibonacci Secrets course.

Here's an example of a stock finding support right at the all important 62% (61.8% to be more exact) retracement level.

CSCO reverses at a key Fibonacci level

On Thursday July 24th, 2003 Cisco Systems makes a spike high within the first hour of trading at $19.20.  The stock never trades close to that price the rest of the day and has a sell off into the close near the 38% retracement level (see the short Flash movie below for more details - sorry, this might not show in all browers).

CSCO <- click for movie (286k, ~60 seconds, opens new window)

The "magical" 62% retracement level

The next day, Cisco opens near the 38% retracement level- then continues lower.

CSCO forms a basic reversal bar at the 62% retracement level with the 10 minute bar's close greater than the open.

From that price level, the stock rallies into the close at $19.07 - more than 4% higher from the reversal low.

Take a look at the "bigger" picture

The sixty minute chart shows an interesting pattern.

Friday's intraday low at the 62% retracement level occurs where the stock previously met resistance.

A week earlier, the stock made a high at $18.20.  This is an example of previous resistance becoming support.

When you have two high probability of success trading patterns indicating a potential level of support, it pays to watch price action around that price level.

In this case, CSCO made a reversal bar (close greater than the open), indicating that the possibility of higher prices was good.

Combine these patterns with a solid money management method and the chances of turning a day trading pattern are good.

If you are interested in furthering your understanding of Fibonacci trading, check out Stephen Pierce's Fibonacci Secrets course. 

Trade well!!!