Since my previous post, I have made some excellent progress on my indicator which I will call Fib Lines.
This screen show shows how the indicator is working on GPRO as of 12/22/2014. I have been bearish on GPRO for some time, but note how it bounced right off the top of the 100% level on the daily chart and put in a "Close above the Low of the High Bar" formation. I still remain bearish on GPRO shares which are now down almost 50% from their highs set just shy of the $100 level back on 10/7/2014.
On a side note, check out how the indicator does a very clear job at showing you where wave 1 begins and ends
Another interesting thing about Fib Lines is that its not just purely a mathematical calculation, there is human input required to find the beginning and end of Wave 1. To see what that can mean over time, consider prior interpretation of Facebook found here, In that, we show the 423% level (which is the last level in the sequence) at $80.88. What happens when the price breaks beyond those levels?
The answer if course it is that it depends on the interpretation of the human analyst. In this case, I expect that Facebook is in the early stages of a long uptrend, so I re-calibrated the beginning and end of Wave 1 and came up with the interpretation shown on the right. You can clearly see likely support and resistance levels from this chart, so it will be interesting to see how price action plays out against these levels.
As for enhancements to my Fib Lines indicator, here's what it needs before I release it for testing in 2015:
- Add the White lines level - as of now I have the Red and Green lines only
- Rename the Fib levels to relationships from 100%. Once you see that, you realize some other cool symmetries such as the tree lines between 1.618 and 2.618 are actually 2.0 and 2.236 when started from 100.
- Move the labels over to the right side of the chart since they are often out of view when left justified as they are now
- Figure out how to distribute the fib level data over the Internet. As of now, the data is hard coded into DLL component of the indicator.
- Add support for Thinkorswim
Some time in early 2015, I plan to make the indicator free to members of my Yahoo Group. If you would like to join my Yahoo group, just send an e-mail to email@example.com.
Have a Merry Christmas and a Happy New Year!