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

Figure 5.43
Short entries on three peaks at the upper borders of PHI-ellipses. 
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WORKING WITH PHI-ELLIPSES ON INTRADAY DATA
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161
Requirements for a valid exceptional trading signal in the direc-
tion of the main trend are:
• The slope of the PHI-ellipse is very steep.
• The market price move has touched the PHI-ellipse twice on each
side (meaning that the PHI-ellipse has a very stable form), and
the breakout occurs at the very end of the PHI-ellipse.
• The entry point for a buy signal is the high of the price bar that
broke out of the PHI-ellipse (vice versa for a sell signal).
Figure 5.44 shows examples of a short trade and a long trade in
the direction of the main trend at the end of a PHI-ellipse.
As before, once a trading signal is executed, a stop-loss and a
prof it target are placed according to the rules previously described.
Trades are closed out by the end of the day.
PHI-Ellipses and False Breakouts Intraday
False breakouts are important chart patterns, and PHI-ellipses are
reliable trading tools to analyze false breakouts on an intraday basis
as well on daily data.
Figure 5.44
Market entries in the direction of the main trend at the final points
of PHI-ellipses.
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162
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PHI-ELLIPSES
Requirements for a short signal are:
• The slope of the PHI-ellipse has to be modest.
• The false breakout has to be higher than two previous peaks.
• The market price has to drop below the support line (outside line
of the PHI-ellipse) that runs parallel to the median line.
These entry rules run vice versa for buy signals. Figure 5.45
shows a pair of sample sell signals from the Dax 30 Index.
Once again, it is important to place a stop-loss and a prof it tar-
get immediately after market entry.