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

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CANDLESTICKS, CHART PATTERNS, AND FIBONACCI TOOLS
the median line, and one valley touching the lower border. The peak /
valley conf iguration gives a unique form to the PHI-ellipse; any other
ellipse would not completely surround the market move.
The sell signal is f illed on a sharp breakout of the PHI-ellipse to
the downside. The prof it target is twice the total width of the PHI-
ellipse. The stop-loss point is at the peak before the short entry.
To help readers follow our explanation and description of trad-
ing signals most easily, Figure 6.34 shows the Deutsche Telekom chart
again.
Before we discuss PHI-ellipses in combination with candlesticks
and /or 3-point chart patterns on an intraday basis, we want to pres-
ent a f inal striking example of horizontal PHI-ellipses as a tool to in-
vest short-term in the direction of the main trend. The product in this
example is the stock of U.S. chipmaker Intel over almost two years be-
tween December 2000 and November 2002, as shown in Figure 6.35.
Figure 6.34
Deutsche Telekom chart from 10–01 to 11–02. Sample trade.
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PHI-ELLIPSES
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Five sample trades show up on the chart, four short trades and
one long trade.
The f irst short trade is based on a PHI-ellipse that has four
peaks on its upper border and four valleys on its lower border. The sell
signal is executed when the lowest valley is broken. The prof it target
is calculated by doubling the total width of the PHI-ellipse. The stop-
loss is placed at the peak before the sell signal.
The second short trade is based on a rare example of a PHI-
ellipse with one peak in the middle on the top border, three valleys
touching the median line, and three valleys on the lower border. The
sell signal is f illed when the lowest valley is broken. Shortly after
the short entry, the market price reverses, but does not trigger the
stop-loss point at the peak before the sell signal. The prof it target is
reached after three months at the target price, precalculated by dou-
bling the total width of the horizontal PHI-ellipse.
To generate the third short signal, we can identify three peaks on
the upper border of he PHI-ellipse, a peak and a valley touching the