Using Fibonacci To Assess Market Pull-Back

There have been a few questions about specific methods I use to select strikes and time my trade entries. One tool I am using right now to assess a potential pull-back, so as to provide sufficient cushion for my short options, are Fibonacci retracement levels.

Fibonacci was an Italian mathematician who discovered that in nature certain numerical patterns repeat themselves. The retracement levels are projected using his ratios. If you would like to see how they are used, Bill Poulos has done a video demonstrating their use.

Fibonacci Trading Video

I do not spend a lot of effort trying to time market entries, but often will favor one side (bull put spread or bear call spread) and enter that side first. I then look for an opportunity to open the opposite side. With the recent selling and the fact we are in a bullish trend, I will try to open a bull put spread and then look for an opportunity to open a call spread. That has not worked the last two months and I have only been able to get into one side of the trade. That's okay. Some months it just does not work out.

My limit order did not fill yesterday. It will be open again today, but I am on the road so I will not be able to watch it.

Christopher Smith
TheOptionClub.com