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When it comes to trading — there are a few schools of thought…

And to be honest with you, some were exposed this year — the so-called quants and fundamental traders tried to make sense of stocks, but couldn’t.

There was one group of traders who thrived (if they knew what to look for) — the technical traders who focus on price action.

You see, there’s one factor that causes stocks to move…

Supply & Demand

If you understand how to identify areas in which demand can pick up (or supply can pick up), it’s possible to uncover trends.

While there isn’t a be-all-and-end-all technical indicator out there…

There is one that comes pretty close.

 

This Isn’t The Be-All-And-End-All Indicator, But It’s Close For Me


“JC, Fibonacci is voodoo!”

I’ve heard that so many times, but just take a look at this chart below.

 

 

Look where Transports started to outperform! At exactly, the 50% retracement of the entire move higher off the lows 20 years ago. Ignore these levels if you’d like. I really won’t.

To me Fibonacci retracements allow you to find key areas of demand, while the extensions allow us to uncover potential areas to take profits.

Let’s take a look at another area in which the Fibonacci tool would be useful.

What about Airlines? Is it similar to the Dow Transports : S&P 500? Will the squeeze continue?

 

 

I think so!

Now for you, stock market bears, what if Ball Corp (BLL) is above last year’s highs? 

Do you sell it because you can’t handle a bull market in stocks?

 

 

BLL is approaching $30B in market cap, and it just broke out of highs. Right now, based on the BLLFibonacci tool, I’m looking at $112 as the target.

And as a reminder, Materials went out at yet another all-time weekly closing high. I’m not buying the “flight to safety” trade into chemical stocks. To me, this is a classic rotation in a very standard and perfectly normal bull market in equities.

 

 

With XLB, I’m looking for a target at the 261.8% Fibonacci retracement, which is right around $78.

Of course, there are other technical indicators to utilize out there, but if I were to choose one… Fibonacci would be my go to.

Author: JC Parets

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