Up-Coming events:

April 2008 Seminar at Sea cruise to Panama Canal

At TradingOurWay, we are currently planning a Seminar at Sea cruise departing out of FT. Lauderdale on April 12th, 2008. It’s an 8 day cruise to the Panama Canal with 4 sea days of classroom activities. We would love to have everyone join us! Complete details can be found on the Tradingourway website.

Note: We encourage you to Sign up now! as the "Early Bird" seminar fee will increase after Oct 29th, 2007. 
 
Rick Saddler, Hit and Run Candlesticks, is holding a 1 day seminar in Tampa, FL Sept 29th, 2007.
 
Over the years, I have watched Rick grow from a novice to a very skilled trader. Rick is a great example of what each of us can do if we are dedicated and focused on our objectives. Checkout his site for complete information. or use the link -  http://www.hitandruncandlesticks.com/services.html 
 
Rick's method of swing trading is simple and mechanical, a way to make a living trading stocks. He strives to find stocks that are poised for a move in a profitable direction and to cycle profits from the market to my pocket as the stock moves in a time frame of 1-5 days or more.

Previous Issue:
 
Thanks for all the great compliments that were received regarding the previous Sector Rotation article. Keep the feedback coming, it is the only way to make this better for everyone. Thanks.
 
I know many of you still have not had the opportunity to read the complete PDF on Support & Resistance. You can still view the complete Support and Resistance  document for a little while longer. I have made some minor updates to it.  Or use the link http://tradingourway.com/docs/Support_resistance_basic_charting.pdf

The survey is also still open, you can view the latest  Survey Results.
or use the link  http://tradingourway.com/surveyresults.html  

The survey will be kept open for a few more weeks in order to give newcomers an opportunity to express their opinions. If you haven't taken the survey, click on the link http://app.icontact.com/icp/sub/survey/start?sid=904&cid=152192

A special, Thank you, to all that have participated in the Survey.
 

This Issue:

As a result of many question on the previous Support/Resistance newsletter, I thought I would provide a Fibonacci calculator that can be use to make the task of calculating target point easier. However, it is also necessary to refresh everyone on just how what is a retracement and what is an extension.  We have 4 objectives in this lesson:

1. Find previous Support/Resistance
2. Understand Fibonacci Retracements
1. Retracements are based off any 2 consecutive reversal points. Usually, the last reversal
   
3. Understand Fibonacci Extensions
1. Extensions use the 3 consecutive reversal points. Usually the last 3 
   
4. Be able to use the Fib Calculator
   

  

Determining Price points to enter into the Fibonacci Calculator

Before we go to the Fibonacci calculator we need to do our normal stock scans and find the candidates. This article will assume we have already completed that step in the trading process. One of the stocks we can across recently is SCON.

 We will use SCON as of close 9-18-07 as our example. It is a stock that many traders have discovered in the last few weeks. We notice on the daily chart that SCON on the Daily chart shows an unbelievable 8 day run. We are now faced with the question of what are reasonable projections for target prices for a LONG trade? While at the same time we need to know the points of possible movement in the other direction.
   
    We start with a weekly or monthly chart that shows this stock is capable of hitting much, much higher prices. However, this is highly unlikely in the next few years. That is about all we can get from the monthly chart because of the extreme price swing. So we move to the weekly chart that shows SCON is capable of much higher prices. Here is where we start our effort to determine possible target points.




1        First  draw on the chart horizontal Green lines to represent the previous Support/Resistance area. These are a “visual best guess” effort, and are not meant to be absolute points, but rather an area on the chart. Target #1 – $9.20, target #2 - $12.15, and target #3 - $16.63
   
2        Next we drawn the last support area. The most recent low. We will use an area just below here as our worst case stop-loss point. I am going to choose $4.87 the low area of Feb 2007.
   
3         Next we switch to a daily chart for a much closer inspection. The green lines we drew do not even show on the daily chart yet.



 
   
4        It is at this point we want to select the 3 “Pivot” points. That is the previous low(A) $1.38 , the most recent high(B or 1) $8.62, and the most recent low (C or 2) $5.01
   
5        Next we need to pick an entry point based on our trading style or strategy. This can vary greatly depending on your style. Personally, I look for a positive signal, such as 2 bullish days out of 3 trading days. Looking back over the last 12 days we have had 9 days where the close was lower than the open and 7 of those closed lower than the previous close. To me this is showing the Bears are still in control. I have set a buy at the close greater than $5.87. That’s just my style and probably isn’t yours. So pick your point of entry.
   
To do the next step requires us to zoom in on the most recent pricing action.



 
6        The only thing left to determine are the target points. Remember we drew green lines on the weekly chart that indicated they may be reasonable targets. That’s where the Fibonacci calculator comes in handy. Problem is it presents you with many projections. What we are looking for is to see if any projections come close to the green lines we drew. As this will act as a confirmation for those points. The most popular Fibonacci projections used by Fibonacci traders are 61.8%, 100%, 127.2% and 161.8% 
   
        
The following series of images will attempt to clarify how the retracement and extension are determine. It is rather detailed and should clear up any confusion one has at this point. Retracements are calculated from any 2 points on the chart, usually the last 2 reversal point. While Extension are calculated using the last 3reversal points on the chart.

Wave 123

 Explanation of how point 3 is calculated.  



Finally, an example wave 123




   Wave ABCD



 Explanation of how point D is calculated.


 
 Finally, an example wave ABCD
      
 

 

Summary:

Any time you can use multiple methods to determine your trading prices the more reliable they are going to be. As we have demonstrated in a couple newsletters now you can use the Fibonacci retracements and extensions along with previous  Support/Resistance to come to the same conclusions as to the potential price points for your trade.

As a foot note, today Sept 19, 2007 SCON was up 4.4% and my entry point of $5.87 was executed. SCON closed at $5.91

The information in these newsletters are but a small fraction of what will be covered on our "Seminar at Sea". So don't miss the Early Bird pricing we have been offering, sign up before Oct 29th, 2007.



 Please feel free to send an email to kermitp@tradingourway.com  with your suggestions.
 
Thank You and good trading,
 
           Kermit Prather