Fibonacci and Gann Applications in Financial Markets

70 Fibonacci and Gann Applications in Financial Markets
In this example, the yield in the Swiss 10Y bond recovery looks to be running out
of steam. The yield is struggling against the congestion at the 50% retracement level
and has not been convincing in the past in showing that a break is going to succeed.
Trendline support which could be part of a wedge formation if there is further failure
on the upside is keeping the yield well supported, but there is little room for
manoeuvre unless there is a successful break higher. The yield will have to move
against the congestion above 50% and prove that the rally is not over. It is interesting
to note that in September 2002 a small congestion developed about 2.80/2.84%
and again in the mid-October period. There is growing evidence that this is a key
problem area for the yield. If there is no successful break higher then the yield will
move lower again quickly. This is one of the problems with Fibonacci retracement
levels: failure to move through retracement levels is usually caused by other technical
reasons, congestion in the main. This chart also demonstrates that a successful
move through various retracement levels is best seen when there is a succession of
bull flags. There are none apparent on this chart and that is one of the issues around
a successful break in the 50% level. This is in sharp contrast to the cocoa continuous
chart seen in the next example.
Despite the attempt to recover from the low in October, cocoa (Figure 5.9) (continuous
basis) has not been able to move higher. There are many congestive reasons
for this, in particular the congestive base formed in September and later in October
and the congestion from June and July. There is a bullish outside day in evidence in
Figure 5.9