This is my first thread on Elite Trader...Anyway, put together some interesting charts on AMGN. Thought it might drum up some conversation. Here is a summary of my thoughts on the attachment: 1) The last two major swing points July 2000 (Major high), and July 2002 Major low. Here we are in July again...will we put in a major swing high point? 2) We are at a key Fibonacci price resistance zone on the weekly chart. 3) We are at the 50% TIME retracement of the 2000 Top to the 2002 low. 3) The daily chart has completed a Bearish Pattern... Bottom Line: AMGN is at a major Time and Price decision zone. What it does here will likely determine the next few months of direction. -D
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Derrik, Are you actually successfull swing trading using these fib techniques? Personally, I dont believe in Fibs and I never use them.. but I know many traders use them. I just see retracements as .33, .5, .66. Anything else is all jazz to me. It seems to me that your strategy involves fading stocks.. since you try to call tops and bottoms via Gartleys and Butterfilies. I dont see why one would want to fade Amgn.. which is in a perfect uptrend.. look at all the losers picking tops with EBAY. Just curious to know what type of results you seeing.. are u actually making $? --MIKE
Hey Mike...to answer your questions. 1) Yes I am swing trading with these techniques. 2) Sometimes I am fading correct, but many times I will find a Gartley or Butterfly for example (and other patterns) within the context of the current trend against a Fibonacci price zone. I'm not saying to short in this case necessarily. I am saying that the 70 to 75 zone represents a major decision point for AMGN. If we clear it...I'll definitely be a buyer. For now though...I'd be on the sidelines for these 5 points. More risk than reward in my book on the long side. It's just what I see. 3) Yes, making $...thank you for asking. Nice challenging thoughts though, much appreciated! -D
Derrik, Why are there decision zones on these patterns at fibonacci demarcated areas? Either a stock goes up, down or, lingers. So, most often, a decision zone exists whereever a stock is trading. Why choose these areas? Are there studies that show that these zones are more statistically likely to bear greater volatility to the stock? Is it anecdotal that we beleive that many traders seek a decision at fibonacci retracements or extensions, or do professional traders - like hedge funds and mutuals - have resources and studies that show that these are more significant decision points in practice? Are Gartleys determined by the fib areas, or are they a convenient fit? Last question, with AMGN in an uptrend since October 2002, are there any technical indications in this stock, or in others where you identify a similar decision zone, that reinforce the premise of the pattern, or further, hint at the outcome? Thanks for posting.
Hi there. Those Fibonacci price "zones" are created using past swing high and low points from the chart. The ratios I use are .382, .50, .786, 1.272, 1.618. You're right there are decision zones at various places on charts. However, my strategy only trades a zone when there is a pattern at one of these zones or that price zone is violated showing strength of trend. These ARE major decision points...yes you do find increased volatility against these zones. As I said in the original column. If that zone is cleared a continuation of the trend is likely and I wait for a long set up to develop (in this case with AMGN). However, If I get a pattern against the zone and I have defined risk I will consider the trade if I get a trigger on the short side. I'm currently trading this style in a hedge fund and have associates in the mutual fund and hedge fund world that are also utilizing it successfully. I like the fact that there is a high degree of skepticism with this analysis.... (contrarian indicator) Fib price zones provide support and resistance areas that assist me in creating an entry and exit strategy. It gives me an objective look at the market....or as objective as one can get in the market Does it work every time...absolutely not. But after a nice sample size do I make money....yes. I have plenty of examples on file for those interested in how it works. A bullish or bearish Gartley is a specific pattern that with 5 points X, A, B, C, D. Each point has specific criteria. If each criteria for each point is confirmed the pattern is good. They are not necessarily a "convenient fit" to my fibonacci work. They are independent. Oh, if you want to reinforce the premise of the pattern....pull up the weekly chart of AMGN and look at the 2002 low...that was a completed Bullish Gartley pattern that lead to this nice bull move. Hope that gives more insight. I was hoping for more discussion on AMGN itself though. -D