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 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.
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