I’ve grown sick of the oscillators failing these days. Who knows how long a stock will remain overbought or oversold? Often times than not, the oscillators have either caused me to take profit too early or enter a position too early. There has also been plenty of times that I was “scared” away from great setups because the oscillators were overbought or oversold at the time. There are actually a lot of trading systems that totally ignore the oscillators, and I am more and more inclined to downplay the oscillators — below sentiments, trend lines, and price patterns.
I’ve noted remarkable price targets being fulfilled to the pennies recently. This is one of the applications of price patterns.
The above SPY chart was from 2 days ago. First, note how the diagonal line turned into support and successfully tested twice. Also, note the height of the first shaded rectangle was successfully used to project the target upon the break out of the horizontal resistance. In the the random walk of prices by the market, there are apparently attempts in finding methods in the madness.
Just today, I’m seeing the same thing again. See the chart below:
Another target projection I’ve used is the Fibonacci projection. This is not Fibonacci extension which I have yet to explore. This could be just my own invention, or might be called something else if it exists. Once the price breaks out into uncharted territory, this technique can be used to identify the proximity of the next “resting” area.
I can’t find the exact chart I want to illustrate this idea, but I’ve found one that equally demonstrate the same idea, albeit it’s not in the “uncharted” territory.
In June SRZ broke the 8.66 support, so if we extend the Fibonacci such that the 23.60% lines up with the broken support, we can find the nearest target. As shown by the chart, it subsequently got darn close to the 7.51 price target.
If we line up the 50% line instead, essentially we’d be doing the same projection as the rectangles we saw earlier.