Chapter 10, Part V. Combination of Fibonacci levels with other lines.

Part V. Combination of Fibonacci levels with other lines.

Commander in Pips: I always tell you that it’s necessary to combine one tool with another one to get greater probability of success. Well, today we will take a look how Fibonacci levels could be joined with other tools that we’ve already studied – trend lines and/or support/resistance levels. This part will be much simpler than previous ones, so enjoy.

Pipruit: Finally, some rest for my brain.​

Combination of Fibonacci levels with support/resistance levels

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Commander in Pips: First, let’s take a look at this combination. Here is the chart – this is daily EUR/USD chart. Tell, me, what you see here.

Chart #1 Daily EUR/USD
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Pipruit: Me again? Commander, you’ve promised that I will take a rest… But it was stupid to count on something like rest, when dealing with you…​

Commander in Pips: Stop grumbling and answer the question, if you do not want to clean every dish in the mess hall tonight…

Pipruit: No, Sir. I’d better answer. You show an excellent chart and made very helpful notes there. So, we have obvious resistance area around 1.3430-1.3450 that was broken by strong thrust up move. Now market turns to retracement down.​

Commander in Pips: That’s right. Also take a look – I’ve marked also a nice example of Wash&Rinse/Stop Licking pattern. See – the market has pierced the 1.3430 resistance and cleared out all the stop orders that had been placed there. It didn’t close above this area. Then it has continued move down. By the way, what is this candle pattern called – right under my arrow note?

Pipruit: Indeed. It is very helpful to see on real example, how W&R should look like. Because if you do not know it, then it will be difficult to recognize it all alone. This is a shooting star, Sir.​

Commander in Pips: Right. So, go on.

Pipruit: Well, as you already have given me the prompt, I see that 1.3430-1.3480 area is very close to 0.382 Fib support from swing up at 1.3479. So, according to the properties of support/resistance lines, that they change their qualities after breakout to the opposite side – 1.3430-1.3480 area will now act as a support now. Hence, the probability that the market will hold above this area is stronger than above just a Fibonacci level.​