Dec 8 Overnight Fibonacci Grid

Dec 8, 2009: 1:12 PM CST

Here’s a quick mid-day post highlighting the short-term Fibonacci Retracement grid from the overnight highs to this morning’s  low, which was active in setting up at least one trade set-up as price tested the underside of the 50% Level.  Let’s see this and also note a current trendline to watch.

Starting with the 4:00am CST highs near 1,107 in the December @ES Futures Contract (remember December contracts expire on the 18th, so be sure to roll over to the March contract soon) and drawing down to the morning 1,087 low, we see the resulting Fibonacci grid in TradeStation.

Price retraced in another potential flag pattern up exactly to the 1,097 level which is the 50% Retracement Level, forming three long upper shadows and a doji-like candle sandwiched between what almost looks like an “Evening Star” pattern.

Either way, this was a quick low-risk short sale due to the 50% retracement line, three upper shadow candles, and – not seen – a negative TICK divergence at the upper level as price formed a new swing high (it looks clearer in the SPY ETF).

Price fell to test the rising trendline which is a key level to watch at the 1,093 level immediately for a potential support bounce… or for a crack below to target lower levels such as the 1,090 or 1,087 swing lows… or lower in the event we make new lows from here.  Watch that rising trendline to be a possible boundary between short-term bull and bear (along with internals, etc).

The main take-away is to watch Fibonacci levels NOT in isolation, but for other methods – such as candles or divergences – to form as price comes into a key level.

See my morning post on the Overnight Bear Flag in the SPY and use this as a comparison to look “inside” the move not captured on the SPY because the futures contract fell overnight.

Corey Rosenbloom, CMT

Follow Corey on Twitter:  http://twitter.com/afraidtotrade

2 Comments

2 Responses to “Dec 8 Overnight Fibonacci Grid”

  1. graspthemarket Says:

    I'm an insomniac so I noticed exactly the same retracement levels overnight–(forget the charts, just watch Bloomberg…kidding). My question comes form your trend line drawn on the chart. Notice how the upward sloping trend line will eventually connect to the 38% — 50%retracement level. This would create a triangle shape (give or take). Let's say that prices bounce off the horizontal trend line and then the sloping line, kind of funneling in. Can you tell with a degree of certainty if this is a bullish or bearish pattern emerging?

    Thanks for any time that you have to spend on my question.

  2. graspthemarket Says:

    I'm an insomniac so I noticed exactly the same retracement levels overnight–(forget the charts, just watch Bloomberg…kidding). My question comes form your trend line drawn on the chart. Notice how the upward sloping trend line will eventually connect to the 38% — 50%retracement level. This would create a triangle shape (give or take). Let's say that prices bounce off the horizontal trend line and then the sloping line, kind of funneling in. Can you tell with a degree of certainty if this is a bullish or bearish pattern emerging?

    Thanks for any time that you have to spend on my question.