Fibonacci support/resistance...hype or created?

[rphuga89]

This may have been answered on ET already. But, I have to ask for some feedback and opinions.

I trade mostly with TA: I incorporate Fibonacci, RSI, MACD, and trend to come up with entry and exit points. I like to trade for 20 % gains as much as possible. I never short stocks.

The reason I am asking for opinions is because of the things I encounter day to day. I have always wondered if Fibonacci points are created or just an ellusion. By ellusion, I mean, is it possible that market makers/specialists use these points to create their market for the day. And, in doing so, create these points artificially? Or do they plot these points out ahead of time and use them because they know many traders will be looking for these points to get in, get out, place stops, etc....

Stretch a Fib ruler over any chart and the prices seem to gravitate to the most common Fib points: 38%, 50%, 61.8%.
When I contemplate a next move I always try to predict where the price is "likely" to go in regards to these points as they pertain to the micro trend and the MACRO trend. I do have a certain like for Elliott wave cycles and will try to identify the smaller wave directions and use these as my clue to the next direction move.

I notice that quite often the price will move to one of these expected FIB points on que. Some days the price moves exactly between these ponts. Other days, the price will move up to one of these points on solid momentum but stop just short of the next point.

Are MM/specialists really creating artificial start/stop points for prices, or are they just following what a computer program tells them is the trading range for the day? How much of Fibonacci movement is caused by the main link in the trading system the
"MM/specialist"? How much is really driven just because sentimental, herd-like mentality?



Any comments and opinions would be appreciated.

 

[maxpi]

I think the fib retraces are a bit artificial. What happens is price runs up because of demand, price gets too high for the big buyers who know that if they stop buying, it wall fall. They wait for a better price and they come back for more. If you see something run up on volume, then decline on low volume, you might see it's volume pick up again and the price will rise again. That increase in volume is not likely to happen at a fib point, it is going to happen where a big buyer decided to back the truck up for another load. Personally, I don't know any big buyers but I don't see them as sitting around watching the fib levels, they probably have a lot of irons in a lot of fires and the decision to buy more of the same stock could have nothing to do with it's current price, little to do with the current price, or they might have set a price ahead of time by really complicated parameters that would induce them to buy more.... I never have seen much consistency between fib levels and where the price runs up after a retrace. I have seen sucker plays where some news comes out on a stock in an out of favor sector, the price runs up on knee jerk reactions to the news, then it retraces through ALL the fib levels and keeps falling!! The littler traders reacted to the news but the pension funds did not buy into the whole thing. The fast traders with their TA all worked out made some bucks on the news, and got out near the top, the fib watchers probably kept buying more on the way down.

 

[rphuga89]

MAXPI


I guess my question is Why do we see prices routinely follow these Fib points day in and day out up until breakouts occur? This
is observed on any chart. Are the mm/specialists really the ones who use these to create their markets day to day until the breakouts/downs?

Speaking of breakouts, whenever one observes a cup-with-handle price pattern, at a certain buy-point a breakout will likely occur. What is the reason that this breakout occurs? Are there so many eyes watching this that it is inevitable because they all waiting to jump in?

Or, are these Fib point movements and breakouts truley just
random because BIG MONEY has decided to make changes?

 

[maxpi]

I guess you are seeing correlations of Fib levels then.. do you trade them profitably?? I have intended to get some fib or gann oriented software because I have seen some amazing calls from confluences and Gann stuff but retraces off of fib levels... never seen any consistency..

 

[rphuga89]

Maxpi

There are times when I am in tune/sync with a stock, in regards to EW, especially once waves 1 and 2 have passed. From here I find the Fib points to be helpful. I plot them out from point A to point B......make a projection in my head where I think the price will go to...then as the price advances I prepare to sell or buy depending on the direction of the wave. Of course I can only take what I can get. I am in no way good enough to say for sure which price point to buy or sell at. I just plan ahead and get the best price I can...these points just help me to focus on what is likely to happen. If the price is advancing up and then stops at one of these points then I feel certain that the next move will be down to another Fib point.I speculate where the pivot point will be and the direction afterwards......from point A to B.. based on the Fib points.

During Waves 1 thru 5 it is a bit easier when I am in sync ,waves ABC are harder for me...I can never guess where these are going or when they will end .It is during this time that it seems anything can happen. The initial run is over.....everything is regrouping.....the next outbreak or downturn is hanging in the balance. I have no choice but to sit and wait during ABC. But, once it starts to run again and breaks up over the 61% fib point I seem to know it is going to advance for a while.

This ABC phase is the basis for my question about the MM/specialist activity. It seems the price is most manipulated during this time and the Fib points seem to be used more as shake outs and commission making.
It is as if they know We Fibonacci techs are watching these numbers and they try to trick us into thinking a rally is underway or the bottom is falling out.

 

[Thunderdog]

Quote from maxpi:

...I have intended to get some fib or gann oriented software because I have seen some amazing calls from confluences and Gann stuff but retraces off of fib levels... never seen any consistency..

My guess is that once you start using gann software your money will be...gann. And that's no fib.