Hello and welcome to another edition of the bulls vs the bears. Last week we touched on How to Map Out Support and Resistance Areas With Fibonacci Indicator. Today we are combining Fibonacci Retracement with Trend Line Analysis. But before we go on , if you are not sure about drawing trend lines look up my post Drawing and Trading Trend lines. Failure do so could result in irreparable damage to your health.
Now that we’ve gotten that little alert out of the way, let’s move on with today’s lesson.
Whenever the bulls or the bears are in control you make use of Fibonacci retracement levels to get in on the trend. So all you have to do is to look for Fibonacci levels that line up with the trend. Let’s take a look at the 1 hour chart of the AUD/JPY pair.
As you can see the bulls have been running amok on the bullish trend line. You see this and you say yourself”Now will be the perfect time to make my trade once the pair touch the trend line.” But then that little voice in your head counters with a whisper saying “How about you pull up your forex toolkit and get your Fibonacci toolkit so you can get an accurate entry price?”
As you can see the Swing Low has been plotted at 82.61 and the Swing High at 83.84. See how the 50% and 61.8% Fibonacci levels have been intersected by the rising trend line. Hmmm…..Something tells me these two levels could be possible levels of support. Let’s find out. Shall we?
Voila! We have a level of support at the 61.8 level. Price ricochets nicely before heading for the hills. Put in some buy orders here and you make the grandest entry into the price action.
After touching the trend line, price bursts through the nearest Swing High and heads for the hills. So it does pay to have the Fibonacci tool even if you plan on cracking the trend line a second time. When you see both a diagonal and a horizontal support/horizontal level just know that other traders are eyeing these levels like a hawk. They ‘re getting ready to pounce when the opportunity presents itself.
And, just like other drawing tools, trend line analysis can be subjective. No two traders see trend lines the same. Their binoculars see differently. But one thing is certain- You will see a trend. But once you see a trend take shape, start looking for ways to go long to give yourself a chance to laugh all the way to the bank.
That’s a wrap for ” ”. Combining Fibonacci Retracements with Trend Line Analysis.” Next week we’ll touch on Lighting Fibonacci Retracements with Candlesticks. Not to worry we’ll not be doing a vigil.. We’ll just use the Fibonacci too to find candlestick patterns.
Til next time take care
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