Fibonacci Trading School

Today we could see a strong move up in less than few hours. You can see that move on lower time frame, like for example on 4 hour chart time frame:

WTI Oil, 4 hour chart

But let’s have a look at bigger picture. On weekly chart we still have an uptrend. Most of moving averages are pointing up and 5 MA is above the 34 MA. That means that on lower time frames we are looking to go long.

Weekly WTI oil chart

Now, we can take a look at daily chart and draw Fibonacci retracement lines. After move back to the 61.8% retracement line (also 100$ support) oil price started to move up. Few days ago there was a break above 34 MA and price is still going up. If correction is really over, move to 110$ or even higher is very possible.

Daily WTI oil chart

Lately I stopped trading on eur/usd, because I did not like its behavior. Moves on eur/usd are very sudden and unexpected. I’ve found that it is easier to trade on other pair – eur/jpy. Trends here are very strong, and moves are easier to catch – at least in last few weeks. I will continue to trade on eur/jpy for next month and then I write more about that interesting pair.

In last few days there was a great short opportunity on eur/jpy. First, we can see on 4-hour chart that this pair had a problem to move to next highs.

Eur/jpy. 4-hour chart

After three failed attempts price started to move lower. I waited until price closed below 200 simple moving average. This was a signal to go short. My target was 161.8% Fibonacci extension and it was hit pretty soon. I closed my position with more than 100 pips of profit. Eur/jpy continue to move down, but I wanted to close all my positions before long weekend.

You can also find many good investing opportunities on lower time frames such as 1 hour, but I will write about this in next week.

Eur/usd is moving up after successful break above 1.33 level. It went up to 138% extension line on Tuesday, which is also a strong resistance for now. On Friday euro was struggling with 127% extension line, but there were many news that day from euro-zone.

eur/usd, 4hour chart

What is next for euro? There are two important levels.
First one is 1.3260 – break below that can be the start of bigger down move.
The second one is 1.3390 so the previous high. Break above that line can mean move to new highs. In that scenario we are looking at 161.8% extension line which is possible next target for eur/usd.

I was so busy with trading eur/usd, that I totally forgot to check S&P500. This was my mistake, because there were some great investing opportunities.
Let’s have a quick look at S&P500. Trend up is strong, but there is a strong resistance – the one at 1407 points. Some traders expected a correction from here – and they were right.

S&P500, 4hour chart

First, there was a move to 78% retracement line and later we saw a move down to 161.8% extension. How could you know that you should sell S&P500? Take a look at 5 and 20 expotential moving averages. It was the first cross since three weeks! In that case it was a good signal to enter a short position.

In the longer term view, there is still a trend up. It is not a surprise that Fibonacci retracement lines on daily chart works great. For now correction ended at 38.2% retracement line. In the same place there is a 20 moving average.

S&P500, daily chart

This support works for now, but it is hard to tell what will be next for S&P500. There was no strong correction since three months. Personally I wait now. I watch resistance at 1407 points. The break above it may lead to another strong move up. If S&P500 will break down below 20 moving average, correction may be deeper.

Few words about eur/usd, which is back at 1.33 resistance. It is a 50% retracement line, so break above may lead to move up. The situation is very interesting here.

eur/usd, 4hour chart

If there will be a break above 50% retracement line, I suggest to switch the view and watch for extension lines:

eur/usd, 4hour chart with extension lines

We have few potential exit areas, but first we should see a break above 1.33.

It is an interesting week for Eur/Usd pair so far. Every day euro was going higher and higher, but this moves were very rapid. Everyone was watching for next strong resistance at 1.3290. That level was too strong for bulls to break and we saw a sell-off today. Many rapid moves, so not easy situation to trade successfully. Below you can see the resistance at 4-hour chart:

4 hour eur/usd chart and resistance at 1.3290

To be honest, it was a huge problem for me to catch those moves. On some occasions it took euro just minutes to move 40 pips up or down.
Fortunately, you can always use Fibonacci, even in hard times like this. In last two days we could find some good investing opportunities. Actual trades were made on 5 minute chart, but I show you 15 minute charts, because it is easier to see the whole move.

Ok, the first trade opportunity:

eur/usd 15 min. chart

Let’s take the first trade from the bottom. There was another strong move to 1.3250 and after that a correction to 38.2% retracement line and 50 moving average. After few hours euro broke above white resistance line – it could be the first signal to enter. Later you could use signal from CCI or RSI.
Second signal was after breakout above recent high (1.3250). The move continued up. As you can see, two Fibonacci extensions were a good place to close position: 127% and 138% extension. As you remember, around 1.3290 is a strong resistance, so it was smart not to wait for move up to 161.8% extension, but to close position at 127% or 138.2%.

Today we had another good chance to short the eur/usd:

eur/usd 5 min. chart

From that point euro went down very strong. It was maybe hard to catch it at first moment, but after correction to 61.8% retracement we saw a break below 0% point (recent low) and there was a sell-off. It ended at 261.8% extension line were bulls were trying to get back to the game.

What is next for euro? If resistance at 1.3290 will hold, it is possible that we will have a head & shoulders pattern. The neck line of that pattern is at 1.30 level. For now it is only a possible scenario!

eur/usd, daily chart, possible head&shoulders pattern developing

There is a chance that bulls will break above 1.3290 and go up to 1.35 level (the place where head is).

We had a very interesting day! We all shall say thanks to JP Morgan and their offer (at least all us having long positions…). That was a very nice breakout above 1372 resistance on S&P500 futures. One more sign that buyers are strong and still wants to buy stocks. That’s good. What is the target for current move?

s&p500, weekly chart

It is good to check the latest swing. We had a correction to 78% retracement level. From that moment bulls are strong and greedy . What is the target for that move? In my opinion 118% (1431 points) Fibonacci retracement line is the first one important resistance. What’s more, that is also a high from May 2008 so I would watch for that level!

And why is this breakout so important? The main reason for that is that we are above head & shoulders pattern from 2011. I marked it on chart, it lasted for 5 months in 2011 before the strong sell-off. Right now S&P500 is far above it, so there is a chance that it is going forward the next extension line.

S&P500 daily chart

Few words about longer term view. My target is 1588 points, so to be specific: 161.8% Fibonacci retracement line and the high from 2007. But this is a long way to go. For now the good money management and following the trading plan is the most important.

S&P500, weekly chart and long term view

I hope that you are having a good trading week so far!

Finally NFP numbers are out and we can trade . Let’s have a look at current situation.

First, S&P500 futures. On 1 hour chart S&P500 is holding above 20 simple moving average and this is my stop loss for this futures.

S&P500, 1 hour chart

Of course the strong resistance at 1376 is intact, so still every scenario is possible. In my opinion, as long as S&P500 is above that 200 SMA on 4-hour chart, we are good to go.

S&P500, 4hour chart

Eur/usd just plunged today. 50% Fibonacci retracement was a strong resistance and it does not help that investors are worried about Europe. So far almost every good news comes from USA, and Europe is not in such a good situation. You can see that on Eur/usd chart. In my opinion, we will get lower here, but this is only a hunch. I watch Fibonacci Extension lines as a possible target.

Eur/usd, 4 hour chart

Aud/usd is in similar situation. 50% retracement line was a resistance here and for now this pair is falling hard.

Aud/usd, 4-hour chart

I am still not sure about current situation at gold. Today it has protected 200 SMA on daily chart, but what will be next in the near term? 1790$ is still a very important resistance, and I think I can draw retracement lines like below. As far as 1790$ and 61.8% work as a resistance, it is more possible to see lower prices on gold.

Gold, daily chart

Eur/usd closed below 200 simple moving average on 4-hour chart. It also broke below trend line. For now I only look for short opportunities here. Trend is quite strong and Fibonacci lines work very well. There are few swings we can choose to draw Fibonacci lines, but in my opinion for now the bigger swing is a better option. We can draw it on 4-hour chart. After correction to 23.6% retracement line, price moved down to 118% extension line.

eur/usd 4hour chart

That last swing (from 23.6 to 118%) is a good swing to draw another retracement lines. Because there are Non-Farm Payrolls on Friday, there might be a little mess here. I personally wait to take another short until price close below recent low (1.3096).

Eur/usd 4 hour chart with another swing

In today’s post I wanted to write more about situation at Eurusd. In last post Euro is falling I wrote that you can follow latest action on 30 min. chart. Below we can see a continuation of that move (on 1hour chart so it is easier to see whole move).

Eurusd, 1 hour chart

After small correction to 23.6% retracement line, there was a break below 0% line (the recent low). Next there was a continuation of move down. The move ended almost exactly at 200% Fibonacci extension line.

In last entry about Euro I mentioned that 200 Simple moving average from 4-hour chart might work as a support. This time I was right and price managed to close above that line. That is a signal, that support here is strong.

Eurusd, 4-hour chart

The direction of next move is still unclear. First of all, Eurusd is above 200 SMA from 4-hour chart. On the daily chart we can see that there is a clear trend line, which also work as a support.
If we are looking for continuation of move up, then we have 61.8% Fibonacci retracement line as another support (together with trend line).

Eurusd, daily chart

I closed my short positions and I now just wait. I won’t open short position on eurusd until it breaks below that green trend line. The other scenario is that supports are going to hold and there will be another move up. Then I will be looking for long opportunities.

Oil was yesterday the most important topic. First there was a report of a Saudi pipeline explosion. Right after that we had a very strong reaction to that news. The report was denied, but oil climbed above 110$. Right now, so a day after, there is a correction and oil is around 107$.

I wanted to show you an interesting thing. You might think that when there is a panic or euphoria and price is just exploding higher, there are no rules to that kind of moves.

Well, when you trade with Fibonacci, you can manage position even when there is such a strong and unexpected move. This is only a matter of choosing the right swing to trade. Why move ended above 110$? Let’s analyze these two charts below.

On the first one I marked Fibonacci Retracement and extension lines for swing from October 4th to November 17th (points A and B).

Daily chart of WTI oil

After that swing there was a correction to the 38.2% retracement line and long move in the range.
Next there was a break above 103$, which started current rally. I mentioned it in posts Oil is moving up very fast and Happy bulls from WTI oil. Few days ago oil climbed above 109$. This is area below 127% extension, which on many occasions is a strong resistance.

To get more accurate results, we can draw extension lines for recent major swing, so for swing from December 19th till January 4th. You can see on chart (this is also daily chart) that move ended exactly at 161.8% extension line.

Daily chart of WTI oil with extension lines

This is why I like to trade with Fibonacci numbers so much – they work well even when there is a panic among investors.

What is next for oil? Right now there is a correction, but it is still very possible that oil may be testing important resistance at 113$, which you can see marked on weekly chart below:

Weekly WTI oil chart

There will be another post about possible scenarios on WTI oil. For today I just wanted you to learn more from yesterday’s price action.