Find Intraday Set-Ups Using Fibonacci
01/30/2012 8:00 am EST
Using ultra-popular Apple (AAPL) stock as an example, Carolyn Boroden explains how to analyze Fibonacci zones to find favorable intraday trade set-ups.
Most traders are familiar with Fibonacci, but let’s talk about a real example of how it’s used intraday with Carolyn Boroden.
Carolyn, you’ve had a recent trade in Apple that set up on an intraday basis; talk about that.
Right, when I first came in to look at the markets that morning, I saw that Apple (AAPL) started breaking down on a very short-term chart; it was a five-minute chart.
What I did was after it broke down, I set up the next retracement and price projection and I looked for an area for a possible short entry.
Now, it did give me an area to look at; it tested that area, it held, and then it triggered on a one-minute chart, so we ended up taking the short sale off of that and looked for a 1.272 target off of that area.
See related: Predicting Price Targets with Fibonacci
How close do you want it to get to those levels or zones to know that it’s a good trade and that the trade is on?
Well if it’s a very short-term chart, I might look within ten to 20 cents. We hit the zone in Apple that morning exactly, and then we ended up getting a trigger a little bit after the high was made. Then as far as the target, we almost made the 1.272 target to the tick; it was off by ten cents.
You mentioned before about it getting “triggered” on a one-minute chart; what do you mean by that?
Basically, what I do is I go to a lower-time-frame chart, and if I’m looking for a sell trigger, for example, I want to see the market take out a prior swing low. I also like to see a moving average crossover, something to tell me that it’s worth placing a bet against the sell zone that I’m looking at.
And what are your favorite moving averages that you like to use?
I use an 8-period exponential moving average (EMA) crossing over a 34-period EMA.
So whatever time frame that is, it’s the 8, 34; doesn’t matter which time frame you’re looking at?
Is this something on Apple you’re looking for over and over again, or are you just looking for the specific pattern and you’ll trade it on any stock for which you see it happening?
I’ll trade it on any stock. As long as it shows up the same way and it triggers, I’ll trade any stock.
How do you find them with so many stocks out there to look at?
I actually scan quite a few every day. I probably look at just over 100 stocks and ETFs every morning, and then I see which ones stand out and which ones are close to levels.
Is it a matter of experience and just kind of flipping through these charts, or flipping on your screen to see and spot those quickly?
It is a little bit, because I’m first eyeballing it to see whether it is worth setting up. If I can see that, from my experience, then I will actually run the levels.