Active-Trader - 5 Days of Fib - Day 5

Welcome back loyal blog readers.

This is the last in our series 5-days of fib where we cover fib levels for many popular stocks. Since we started at the beginning of the alphabet, its only fitting that we start with end in this wrap-up post.

We start with real estate giant Zillow.  Considering this company still hasn't earned a profit, the stock has been a success rising to a new all-time high this past week after an IPO at $40 back in 2011.

Regarding fib lines, you may ask, do the lines provide an actual usable information when trading?  I can tell you that they do here's how.  This past week, I was fortunate to get long the Jun 21 100 calls at about on 6/10 at about 18.60.  2 days later we had a major breakout and the stock shot up to all-time high territory at about 124.  As this point, confidence was high, the position was well in the money.  But noticing major voodoo resistance, I sold the option at 24.00 on a spike up to resistance.  It wasn't the high of the move, but it clearly formed an area of resistance.  Like magic the stock sold off from those levels and found some support in the low 120's.

As for the voodoo wave 1 levels, Thinkorswim has a handy feature where you can hold your mouse cursor over the 100% area of the Fib retracement and a box pops up showing you the price levels.  Using that, we can see that wave 1 started at about 24 back on 11/15/2012 and ended at about 62 on 5/10/2013.   Once you know that, all of the other voodoo levels are easily calculated using the Fib-Retracements tool.  Using that, we can see that we have some resistance to get through at the 261% line here at 124, but we are still well short of the 423% line up at the 186 price level.  I expect further upside in the shares and went out long the June 21 120 call looking for a spike up this coming week.

Next and last up on our 5 days of voodoo series is restaurant review site YELP.  Cramer calls this company the 'holy trinity' of tech - social/mobile/cloud.  Unlike Zillow, I don't use the service myself, but the stock took a major pop this past week when travel giant PCLN announced it would acquire restaurant reservation company Open Table (OPEN).  I don't use that service either, but I was long YELP and made some money on the pop in the stock.

As for the Fib levels,  wave 1 started at 13.28 on 5/29/2012 and ended at 6/23/2013.  I don't have complete confidence in these levels, but notice how the 161% line - easily penetrated on the way up, became support just being breached to the upside.  For even more convincing evidence, notice how the recent low in the stock (at 49.11) was just pennies below the 161% line at 49.33.  You can't make this stuff up and is further evidence of the power of fib lines in action.  BTW, I went out long the next Friday Yelp 70 call at 6.28.

Looking back at the fib series in retrospect, I didn't even get to the major indices, DIA, QQQ, SPY and IWM.  I expect to cover those in a future post.

Happy Father's day to all the dad's out there and enjoy your day and the rest of the weekend.  And have a great trading week ahead.