If identifying head-and-shoulders or cup-with-handle patterns
has left you frustrated, donít despair! This classic
system might be for you.
Price patterns by themselves (without
moving averages and indicators)
are all that is necessary to chart
a stock and understand whatís happening.
We might say that pattern
recognition is the heart of technical
analysis. If thatís true, why
are technical indicators the backbone
of 99% of our systems? Is it because we have trouble
identifying those head and shoulders, cups with handles,
and ascending triangles? Hereís a technique that uses
price charts only, is fairly easy to master, and has a track
record of 70% wins.
I use Fibonacci ratios to measure the retracements of a
stockís up and down movement, with the objective of developing
a geometric pattern that, when completed, gives a buy
or a sell signal.