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January 13, 2009

Fibonacci Trading

By Planet Wealth

This week the XAO touched and retreated off a significant Fibonacci level suggesting a possible flag formation.

Flag formations (definition discussed in BHP post 17/11/08) have a higher rate of success when the flag flies at the 50% Fibonacci level. The last major higher on XAO was at the beginning of November and this was the start of the mast. The sideways movement that has happened in the six weeks or so has been the flag forming. Last week the flag tipped the 50% level and has begun to lose momentum. If we see a breakout at the bottom of the flag, this would be confirmation of the pattern and it is likely the XAO will fall another 1000 points, the same distance as the first half of the flag mast.

(click on image to enlarge)

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