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

Figure 6.25
Deutsche Telekom chart from 01–02 to 11–02. Sample trade.
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SUPPORT AND RESISTANCE LINES
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Intel Sample Trade
In our third chart example, Intel, we start with a sell signal out of a
rectangle that is broken to the downside, as shown in Figure 6.26. The
prof it target at twice the width of the rectangle is also the lowest low
of the downtrend.
Two buy signals are possible. The f irst buy signal can be gener-
ated at a price level of 15.15 USD when the resistance line of the de-
scending triangle is broken. The second buy signal stems from the
peak that penetrates the resistance line of the rectangle at the price
of 16.40 USD.
Within a couple of weeks, the profit target, which is the upper re-
sistance line of the rectangle, is reached at 19.89 USD. The short-term
trader takes a prof it of about 20 percent measured on the entry price.
In a long-term perspective, an alternative strategy for main-
taining accumulated profits is to hold the position until a trailing stop
is triggered.
Figure 6.26
Intel chart from 01–02 to 11–02. Sample trade.
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204
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CANDLESTICKS, CHART PATTERNS, AND FIBONACCI TOOLS
If we doubled the width of the rectangle again as we did before,
we would come to a second prof it target level at 23.50 USD—which is
a powerful and optimistic projection of the trading potential of the
Intel stock.
Japanese Yen Cash Currency Sample Trade
In the Japanese Yen cash currency, a symmetrical triangle is broken
to the upside at 118.90. The short-term oriented trader realizes a
quick, but solid profit once the market price penetrates the high of the
symmetrical triangle at 121.40.
In a long-term perspective, we can calculate two prof it targets.
The f irst one is the resistance line at 125.50, based on the chart pat-
tern in May and June 2002. The second prof it target is at 127.16, that
is, twice the height of the symmetrical triangle. Figure 6.27 shows
the long trade in the Japanese Yen cash currency and the correspond-
ing stop-loss and prof it target level(s).