Finding Fibonacci Triple Support Intraday on SPY March 7

Mar 7, 2011: 9:59 AM CST

I wanted to share a quick lesson on locating a triple multi-day confluence support zone in the intraday SPY (and S&P 500) that helped shape Friday and now this morning’s trading tactics.

Let’s see the Triple Confluence and how to put it to work for you in the future:

While we can always see how something played out, let’s take it step-by-step as this developed and learn the lesson on Confluence Fibonacci.

In Chapter 6 (Fibonacci) of the new Complete Trading Course (now available), I defined how to identify Fibonacci confluences, both on the daily and intraday frame (with examples).

The recent market action shows a great example of this technique.

While most traders who use Fibonacci simply start with a swing low and draw to a swing high and then locate the retracement levels, if you take it one step beyond and draw from TWO swing lows to the same swing high, you can look for potential overlaps in the retracement zones.

That’s what I did above – I took the February 24th swing low near $129.70 along with the recent March 2 swing low near $130.60 and drew two grids to the common recent swing high at $133.60 on March 3rd.

The simple Fibonacci Retracement Tool then shows me the respective retracement areas as I attempt to answer two questions:

1.  What area might provide support on the way down

2.  Are there any obvious confluences/overlap with Fibonacci and any other price level?

To keep the lesson short, the two grids identified TWO confluence levels – one at $132.10 and the other at the $131.70 level.

To answer question 2, there was a simple prior price resistance horizontal trendline that snagged not only the recent swing highs from March 1st and 2nd, but a little pivot swing low from February 25 (not important, but worth mentioning).

So as price falls in real-time on the session Friday, I have these two potential areas to watch – especially the lower $131.70 which takes into account both Wednesday and Thursday’s swing high – that is important.

As I showed this example to members of the Idealized Trades report, we were targeting the $131.70 area to see if a potential market turn would occur… and as price interacted (forming a triple bottom) with this level, crystal clear positive divergences formed in the TICK and Momentum – further evidence that a market reversal was likely.

Keep in mind that there’s no guarantee, but these kind of confluence levels – and the intraday structure as price tests them – allow for a low-risk (the stop goes just under the confluence) and high probability chance that a market will at least pause if not fully reverse up off a confluence multi-timeframe support level… especially if we see positive/bullish signs in real time as an intraday market tests these known reference levels.

As I write this Monday morning, we’re seeing a continuation of the reversal that brewed off a triple confluence  support price (Two Fibonacci levels and one important prior price level).

It’s these kind of lessons that help us see the broader picture beyond our intraday 5-min charts and drive these concepts home – as these lessons do repeat into the future.

Corey Rosenbloom, CMT
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