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Re: retracements



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At 12:47 AM 3/25/98 EST, James inLA wrote:
>I'm working on a short term system.  The system picked the previous Intel
>bottom, which I bought and turned a nice profit in 3 days.  The next bottom,
>the system signalled another Intel buy.  I bought and that's when Intel
gapped
>down and the rest is history.  I was stopped out.  However, when I was
looking
>at that second trade, I did worry about the fact that the low was very close
>to the previous low.  It did qualify as a "higher low"... but just barely.  I
>believe the retracement was too far to be a healthy sign.  Therefore I
want to
>add a filter to this system that checks to make sure that the current low
is a
>certain percentage (a still-healthy) percentage above the previous low.  I'm
>going to use the MRO function.  My question is, does anyone know off hand
what
>the FIB retracement should be?  Thanks!
>
>Jim
>
>

Jim,

A .618 retracement would be a deep one, and if price
approached it with any speed/momentum, I'd not take
the trade, though it can produce profitable
recoveries.

A .318 retracement is more usual in a healthy uptrend,
you should still avoid a trade after a strong thrust
toward that Fib-node though. Also, unless you aim to pick
the absolute bottom each time, you could wait for
confirmation that price is showing support at the
.318 node before taking a position (particularly with
longer-term trades ie not Intraday).

This is a very brief description, but enough to get
the process going.

-Neal.

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