august week 2, page-11

Do Fibs Fib?

Fellow chartists I have been using fibs more & more in my charts but a couple of things I have noticed and concern me are highlighted below. Hope for any and all comments.

Have had a general interest in KAR & on my watchlist (who wouldnt be attracted to those big moves?) Totters recently did a great series of charts using p/fs on the KAR thread for anyone interested; not sure they were posted here. Thought I would have a bit of a look at how fibs fitted. Daily line chart of last cuppla years of big moves below.





Observations:
(I will use the captions 1-4 on the chart to identify position on chart)

-The line chart is based on the closing price
-The fib retracement on Incredible Charts (IC) allows "closing price" or "highs (H) and lows (L)" as an option for drawing the FR; I generally use H & L

- IMO this chart shows the power of the Fib. Note:
- initial move down from 1 finds support at 23.6% fib.
-price finds support and res a number of times between the 38.2% and 50% fibs
-at 3 and 4 price finds support right on 61.8% ($5.64) fib: price closed $5.70 at 3 and $5.68 at 4. gotta love that.
-points 3 & 4 could also be termed a double bottom

Conclusion: From a TA perspective a break back down thru 50% would signal IMO a reasonable likelihood of a test of the 61.8%.

But then I looked at the chart using candles: (In fact I only see the line chart on IC because it defaults to line charts when you go to longer time frames)




Observations:

Main point Is that suddenly point 3 does NOT support on 61.8% because of the very long candle that opened at a very low price. It opened an amazing $1.40 below where it closed!!!

I dont want to overcomplicate point with more charts but if you put fib ret on major Jan Feb 10 down move the issue is even more dramatic because of the extreme candles at both ends of the move.

So if nothing else:

-Do peops think that FR should be based on closing price or H & L?

-Is it better to use the retracements to "forecast" closing price or H & L?

GJ