high volume nodes, retracments and extensions

I dont really use on Fibbonaci numbers however they are close to 40-50-60% which are a sign of the health of a retracement:

A characteristic of a healthy bull market is that it makes higher-highs and higher-lows. This indicates a continual upward shift in expectations and the supply/demand lines. The amount that prices retreat following a higher-high can be measured using a technique referred to as “percent retracement.” This measures the percentage that prices “retraced” from the high to the low.

For example, if a stock moves from a low of 50 to a high of 100 and then retraces to 75, the move from 100 to 75 (25 points) retraced 50% of the original move from 50 to 100.

Interpretation

Measuring the percent retracement can be helpful when determining the price levels at which prices will reverse and continue upward. During a vigorous bull market, prices often retrace up to 33% of the original move. It is not uncommon for prices to retrace up to 50%. Retracements of more than 66% almost always signify an end to the bull market.

Some investors feel that the similarities between 33%, 50%, and 66% and the Fibonacci numbers of 38.2%, 50%, and 61.8% are significant. These investors will use Fibonacci Levels to view retracement levels.

I have attached my homework from this weekend. I first added the areas of interest I have for next week in red, mainly HVN and MCHVN’s.

I wanted to do some work on retracements and extensions so I added some fib levels. The problem I find with fib numbers is that you can do an infinite amount of combinations and come up with some levels that match other areas but tell you nothing – convincing yourself that you see something but is really nothing.

Anyway – I did manage to find some things. I used HVN areas as the 0 and 100% retracement areas – (I did not use the min or max or mid price – I went down to daily or weekly level to find the correct VPOC to use and that is why I included a MC view of Jan 30). This shows the logic of what I am attempting:

I found that 1270-1316 move (yellow on my chart) retraced 50% and stopped between the 1290 and 1296.75 HVN’s.

I saw how this move could extended to 40-45.

I then used the 1296.75 as a base and Feb22-Mar03 VPOC/HVN at 1365 as a top – This was used to show Tuesdays 50% back.

I tried to keep it to a minimum (I excluded 38% etc) – I think I jumped to one huge conclusion on something that is a feature of IRT but not really something used in trading – that is the 100% extension to 1363.5 – it is possible curve fitting by me or a happy co-incidence however I am going to keep an eye on these retracements for the bigger picture.

Afterwards I did some more research and found that 2 of my favorite trading mentors use 50 back. One uses 127% and the other 161.8% for extensions. The previous retraced 50% to HVN 1297.00. It then extended 161% to 1345.5. Current extension targets are 1383.5 for 127% and 1407 for 161%.

I like to look at these moves in terms of boxes. The LVN at 1328.25 seems to divide the boxes once it has broken above.

It is best to ignore the 50% and 200% extensions – they only appear because I have selected the extension by price option in IRT.

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