XAU and Fibonacci Numbers

This online stock trader was gone a few days for the 4th, and missed the excellent move in AEM, and the warrants AEMLW. I did catch the rule of 4 breakout in the XAU on Friday though. The chart speaks for itself!

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XAU 148 is the next area of resistance. Now I want to mention something that is interesting about the daily XAU chart. Let’s start counting candlesticks beginning with the first pivot low. You have 5 bars until resistance at the first pivot high. Next, there’s 8 bars to the second pivot low. If you keep counting you’ll see that there’s 13 bars (ending with a red wide range bar). Then a reversal, and 5 candlesticks leads XAU back to resistance at point 2. 5 bars back down leads us to the 4th pivot low. It’s not an exact science, so there’s an extra candlestick at the third pivot high. 5 bars bring the XAU back down to the 5th pivot low, and 5 back up to resistance. Ok. So here’s a trick to look for on any time frame. The sequence of Fibonacci numbers is 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, etc. We’re really only concerned about 3, 5, 8, and 13 when trading. Notice how the sequence of candlesticks up and down, between support and resistance, correlates with the Fibonacci numbers. Stocks will generally stay in 3 – 5 bar swings. You will have periods when they’ll move to extremes of 8, or 13 bars though. That’s when it’s time to look for reversals. It’s amazing how this often works, and a trading tactic to keep in mind.

Based on the sequences that were playing out, it was a fairly decent bet, that the last move up from support was going to last 5 bars.

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