Candlesticks, Fibonacci, and Chart Pattern Trading Tools : a synergistic Strategy to Enhance Profits and Reduce Risk

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the Fibonacci ratios. PHI-ellipses as Fibonacci trading tools are part
of the WINPHI software on CD-ROM and can also be found as online
trading tools at www.f ibotrader.com.
In a second pair of charts, there is also some recognizable sym-
metry of investor behavior. In contrast to the first examples, the peaks
on the right side do not reach the upper borders of the PHI-ellipses
(see Figure 5.42, again on the Dax 30 Index).
The PHI-ellipses in these examples do not need the second peaks
on the right, because they get their stability through the peaks and
valleys that touch the respective median lines.
Three Peaks (Valleys) at the Upper (Lower) Borders of
PHI-Ellipses
Most trading signals generated with PHI-ellipses on intraday data
occur when three peaks or valleys are formed at the upper or lower
border of the PHI-ellipse.
When three peaks have been established at the upper border of
a PHI-ellipse and the parallel to the median line is broken to the
downside, we immediately get a sell signal. The opposite strategy
holds true for buy signals based on three valleys at the lower border
of a PHI-ellipse.
Figure 5.42
Symmetry in price patterns with peak on the right not reaching
the upper border of the PHI-ellipse.
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PHI-ELLIPSES
Figure 5.43 shows four examples of short trades with three peaks
established at the upper borders of the underlying PHI-ellipses.
Once a trading signal is executed, we place a stop-loss and a
prof it target according to the rules previously described. Trades are
closed out by the end of the day.
Breakouts of PHI-Ellipses in the Direction of the Main Trend
In strong market trends intraday, we may get a buy signal on a break-
out of the top or bottom at the end of a PHI-ellipse.