Fibonacci and Gann Applications in Financial Markets

76 Fibonacci and Gann Applications in Financial Markets
Figure 6.1
This example (Figure 6.2) takes a longer term fanline from the high in September
2002 for corn (continuous basis future contract) and the congestive base in July
2003. This shows up some interesting issues that the novice analyst should be aware
of, in this case that the spike high in May 2003 is not significant in Fibonacci fanline
terms despite hitting the 61.8% fanline, as this pattern could not be created until
the low in July 2003 and it is simply coincidence. Looking at the development of the
yield after the low, the contract has maintained a broad consolidation about the
38.2% fanline resistance level, especially after the failed attempt to attack 61.8% in
early September. However, notice the sharp move that resulted after the break of
38.2% in late October and the brief flag pattern above the 50% fanline later that
month. This is encouraging as it is additional bullish evidence for the recovery in
yield; at that point a break towards the 61.8% Fibonacci fanline level should have
been considered. Again after breaking from the 61.8% fanline, other technical tools
should be used. This chart also shows a gap, but this is not a price or yield gap but a
rollover gap, (see Appendix 1 for an explanation).
Figure 6.3 is an excellent example of the fanline in use. The US Treasury Bond
future is showing exhaustion after the rally and peaks at 124.375. The fanline is constructed
with this level as the extreme and the origin of the pattern is set at the
March 2002 low at 97.50. Once this pattern has been implemented then the forecast
can be made and this fanline works fairly well. Notice the consolidation above the
38.2% fanline support which, once successfully broken, triggers a sharp move lower