Swing Trading Strategies & Stock Picks Since 2003

It’s hard to come up with a good title that gets you to read a post about “Fibonacci Confluence,” but it’s an important and useful tool you can learn - if you haven’t already - that can help you uncover possible targets for intraday traders to play for, and also areas of hidden resistance (or support) that sets up a reversal trade when combined with other indicators.

Let’s take a look at today’s Fun Fibonacci Confluence in the intraday SPY.

The 15-min chart sets up the grid we used today:

(Click for full-size chart)

To find hidden Fibonacci Confluence zones (for overhead resistance), start with a key swing low and then look backwards to at least two (preferably three) immediate swing highs in the downtrend.

Draw standard, no frills Fibonacci Retracements grids to each of these swing highs.

Then, observe any levels of confluence (overlap) in the retracement grids, as shown above.

That’s all there is to it!

The first level of resistance off Friday’s lows came in at the $106.75 level, which held price for a time both at the close on Friday and early this morning, giving nimble traders opportunities.

The second level of resistance was the $107.40 area, which was Monday’s intraday high.

Traders could have bought long and exited as price touched these levels, and then considered getting short if lower timeframes showed sell signals (like reversal candles or negative divergences).

It turns out we did see negative structure heading into this $107.40 confluence area - let’s see it.

Intraday 5-min SPY trading grid and Oscillator:

(Click for full-size image)

I’m showing the 3/10 Oscillator which marked a distinct negative momentum divergence that formed as we made new highs mid-day Monday - that’s a non-confirmation and a very bearish omen as we rally into any sort of overhead resistance level.

It gives nimble (aggressive) traders a chance to enter short close to the resistance and place a tight stop perhaps beyond $107.50 to play for a small retracement at a minimum (short) or a potential full swing reversal to lower support levels.

Before the close today, we had already fallen $1.00 off the intraday high and the confluence resistance level shown above.

There’s no way to know if a certain level will hold, but you can help put the odds in your favor by looking at non-correlated methods (such as momentum divergences, internal divergences such as TICK, reversal candles, and other methods).

I enjoy using Fibonacci methods because they help give targets and levels to watch as price comes into these zones.  It’s often very neat when a Fibonacci level intersects with a daily Pivot level… but that’s another story!

That’s the idea of my Idealized Trades daily service, which explains these professional strategies in more detail each day for intraday traders.

Today gave a great textbook example of this concept and it’s helpful to learn these “Fun Fibonacci” lessons whenever possible.

Corey Rosenbloom, CMT
Afraid to Trade.com