Using Fibonacci To Time Your Trades

After some more study about how to better time my trades, I had an epiphany today.  If I could use the Fibonacci series on time cycles I can plan the best moment to place a trade.  Of course there is no crystal ball but nature’s own math can help you come close to being in harmony with the “organized” chaos of the market. 

I was introduced to the Fibonacci Queen Carolyn Boroden through watching Jim Cramer.  Her analysis turned on my light bulb about using the Fibonacci series over time and not just over price action.  I started using the Fibonacci time tool in Think or Swim this morning on my Facebook trade and realized that I could have made a better decision about timing my entry point than I did.  I entered in on Monday when I could have waited till Tuesday before I entered the trade.

If you look at the chart you can see where I placed the Fibonacci tool at the beginning of the trend and it traces the moment where I could have placed the trade.  I placed my trade on Monday (yellow circle) but I should have placed my trade on Tuesday (blue circle).  The line drawn in black shows the Fibonacci measurement at where I should have been focused.

I used the tool on the 5 minute and 1 minute chart too and it works just as well.  This is groundbreaking for me because I learned from trial and error that it is always best to wait for a pullback before entering a trade but the key is timing the end of the pullback.  This Fibonacci tool will help me plan my entry a lot more efficiently. 

Cramer's Wisdom

Cramer made some important points on Friday.  He talked about having good timing and also not to sell your total portfolio when markets go down.  You can sell some but not all when things turn bad because things will always turn around.  He also reiterated an important point he made some weeks ago: do an hour’s worth of research on each stock you own so you know what makes it move.  This is how I’ve been playing Walmart with some good results.  My recent loss on Walmart has made me tentative but I can still play the stock by going short when it is too high.  

“The most important thing you can do as an investor is never stop learning” - Cramer

http://video.cnbc.com/gallery/?video=3000104198&play=1

 

Market Update 7-18-12

Yesterday was a bit choppy but I was able to make a nice run on Walmart again.  When Bernanke started talking and not saying anything about QE3 the market tanked and went back to a support level.  I watched Walmart until it got really oversold and then I knew that it had fallen too far.  Walmart is too strong a stock to stay down for any length of time so went in after I saw some green candlesticks which showed that the stock had strength.  I waited till it got back up close to its new highs and took profits.  

I got into Dunkin Donuts as I saw it swing up but I didn’t make it high enough to make it to my profit margin.  That was a bad move because it fell back and never regained its strength.  JP Morgan downgraded it so some of its energy had been sucked out.  Hopefully it will rebound off of the moving average today.  The 15, 30 and 60 minute charts all have it right at either the 20 or 100 period moving average.  Let’s hope it bounces back.

After watching Cramer’s picks from yesterday I’m looking at FUN and MCD.  I’m more partial to MCD because it is a major brand name and the trade volume will be there.  MCD made an inverted head and shoulders and just moved ahead of a resistance level.  It has also pulled back to the moving average on a couple charts.  Cramer also mentioned one of his analysts said he has a $97 price target giving us about 6 more points to run. I ran it through my stock valuation calculator and I have at least a 95 price target. I think MCD is about to pop.  I may get into it today if I see strength (that’s if Walmart doesn’t break its highs).