Monday, February 22, 2010

Using a Fibonacci grid from Friday to predict price action today

I wanted to point out the power that Fibonacci grids exert on the market by drawing a grid from Friday's lows and highs.

Fibonacci grids are not magic and they don't have some sort of hidden "power" over prices because of some mysterious use of number sequences. They work because patterns in the market continually repeat themselves over and over again. And they work because there are a lot of people (like me) who trade using Fibonacci grids.

I wanted to point out using a 5 minute chart of SPY how the action last week can effect price action this week. You'll notice that today's prices bounced around in Friday's range and often bounced off exact grid retracements (blue arrows). With knowledge that these areas will provide support and resistance to price movement, you arm yourself with a very powerful "predictive" capability that many traders out there aren't aware (or capable) of.

No comments: