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

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PHI-ELLIPSES
term, midterm, and long term. Investors’ behavior is expressed in both
small and big patterns, which in the end are all integrated into the
same picture, as shown in Figure 5.30.
PHI07 circumvents f ive of the six PHI-ellipses discussed thus
far. Only PHI02 is not circumvented by PHI07. As mentioned, PHI-
ellipses develop over time, and it is important to be patient and wait
until the total picture reveals itself.
The f irst critical point in the development of PHI07 is point X
as the side point of the 3-wave pattern from A to F and back down 
to X (Figure 5.30). The side point X changes to side point Y at the
same moment that PHI01 reaches its f inal point. The f inal shape 
of PHI07 is realized when the side point changes from X to Y and
when the f inal point of PHI06 is reached, merging with the f inal
point of PHI07.
Such a phenomenon seldom occurs, and is only documented in a
long-term analysis with multiple PHI-ellipses. Our f indings demon-
strate how important it is to combine the short-term and long-term
Figure 5.30
Japanese Yen chart from 04–00 to 11–00. PHI-ellipse PHI07.
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WORKING WITH PHI-ELLIPSES ON DAILY DATA
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perspectives of investment strategies. The beauty of Fibonacci trading
tools is that they work perfectly together.
According to the general investment rules on PHI-ellipses, 
the f inal points of PHI06 and PHI07 provided opportunities for es-
tablishing a short position. However, the market in Japanese 
Yen cash currency did not go lower, as assumed, but higher (see Fig-
ure 5.31).
A pattern like the one shown in Figure 5.31 is a rare exception,
but it conf irms that the end of a PHI-ellipse is either an indication of
a trend change in the opposite direction or a breakout in the main
trend direction.
In most cases, the market price reverses at the f inal point of a
PHI-ellipse. But the long-term picture in the Japanese Yen cash cur-
rency reveals that after selling short at the end of PHI06 (or PHI07)
and getting stopped out of the short position, it is wise to reverse
the position to the long side. There is enough trading potential to the