Fibonacci and Gann Applications in Financial Markets

Application and Common Errors in Fibonacci Fanlines 99
Figure 6.28
after a considerable rally but price action has not built in a succession of key congestive
supports to assist. It has to be remembered that in a rally as many congestive support
consolidation periods as necessary are needed to sustain the move. Corrective
moves can develop, as was the case with the correction in later May, but where there
is no scaffolding the price channel will break, and break suddenly and violently as
happened in June. Once a trend is in motion it is very difficult to stop. That is one of
the primary axioms of technical analysis, and no trend is more difficult to stop than a
runaway bear trend, as can be seen in the May–November period on the Bund chart.
Even the attempts to recover were unsuccessful in September, as key resistance levels
did not come under much pressure. It was only on the recovery from the significant
channel support in December that saw a recovery of note.
In this chapter the problem of a running high was identified and some solutions
to dealing with this phenomena were discussed. Running highs within shallow bull
channels as seen earlier are difficult to compensate and there may be little or no
additional clear evidence for redrawing a fairly good fanline to take account of new
highs (or lows in the case of a bearish running low). Unless the analyst is 100% confident
in using a fanline as a target level then a broad brush attitude can be adopted
here. In any case, I am wary of using a fanline value as a target as this has to change
as the time axis progresses. It is better and fairly sufficient to use the fanline pattern
as the target rather than one particular set value of that line at a certain date. Forecasting
dates is notoriously difficult to do and there are other methods of predicting