Fibonacci 38% Sell Signal

Table of Contents

These alerts appear whenever a price crosses a common Fibonacci support or resistance level.  When a price moves in one direction for a certain price interval, then turns around and moves in the other direction, many traders use Fibonacci numbers to determine interesting price levels.  When the price gets as far as one of these levels, we generate an alert.

The most common interpretation of this alert is a reversal.  The icons and textual descriptions of these alerts are based on this interpretation.  When the price goes down through a level, the icon is green and the text says buy.  When the price goes up, the icon is red and the text says sell.  Warning:  Trading systems involving Fibonacci levels typically have additional criteria for entering a trade. These alerts tell the trader to take a closer look because the price is at an interesting level.  Do not buy or sell only from these alerts.  This is a very popular technical indicator, so there are numerous books, websites, classes, etc., describing different ways to trade with Fibonacci.

These are some of our more intricate alerts.  There are three interesting points in the pattern.  Although the analysis of these points is similar to our other alerts, each point is examined using different levels of confirmation.

  • The point on the far left requires the strongest volume confirmation.  This algorithm is similar to the algorithms used to generate our geometric pattern alerts, like the rectangles and the triangles.  This ensures that we have enough data to see a meaningful pattern.  Note that some of the volume required for confirmation has to happen before the pattern starts.  This ensures that the alert always starts with a pivot, and we're not just looking a small part of a larger pattern.  The description of each alert starts at the extreme point of the pivot, and does not count this extra confirmation.
  • The point in the middle requires volume confirmation similar to the lines we draw for the support and resistance alerts.  Once we have established a valid start for the pattern, we do not need as much to recognize the second point.  In fact, this gives us more freedom, especially when tracking multiple pairs of support and resistance lines at the same time.
  • The final point requires the least confirmation.  No confirmation is required in advance; a single print crossing the Fibonacci level can set off these alerts.  However, we examine the trend after reporting the alert.  If the trend follows this initial print, we are done.  If most of the prints do not cross this threshold, we reset the alert, and look for the price to cross the level again.  This is similar to the algorithm we use for the faster versions of our crossed support and resistance alerts.

Each of these alerts can be filtered based on the volume inside the pattern.  Like the description, this filter only includes volume starting at the first pivot.  We do not include the volume before the pivot, even though it was used in the analysis.  More details on this filter are listed below.

Alert Info for Fibonacci 38% Sell Signal [FD38]