Hello Treefrog, Wavepicker,
Defining a run for the purposes of drawing in Fib retracements, shouldn't the run be defined by the very extremes of the price move?
Thanks
Hi Barrett,
Yes it should. But do you plonk your charts on monthly bars and sit around waiting for confirmation or do you use a shorter timeframe and trade/watch the in between runs when exhaustion tops become apparent or the recent dip starts stalling at 50%.
eg the current gold run can in hindsight be seen to have started apr 2001 but back then it was not so apparent.
my
own assertion is that if a clear run retraces more than 50% then that run is negated as a usable reference run for looking for further opportunities from it.
It does not mean the overall uptrend is finished - uptrend rules still apply - if it is still making higher hi's and higher lows the retrace levels can be whatever for that uptrend to be intact.
Gold atm is still in a clear uptrend; and on the weekly chart there has yet to be a more than 50% retrace on the main gold run since those first two nervous starts in 2001. Just check out the 50%ers - there are many gold seems to love them.
In fact put the current retrace on the weekly since apr 2001 and it does not even account for a 23% retrace as yet - I regard 50% as a fair dinkum retrace
of the relevant run so the gold bull is just getting stronger for mine.
In fact, much of the debate stems from people continuing to use the daily or weekly chart when they should switch to monthly bars/candles or even quarterly or yearly over the longer periods - the monthly being needed to get things in perspective/proportion and avoid "the sky's falling", "no it's not" "yes it is" debate. Un less of course we are trading/investing fibs then the weekly is hard to beat.
In the first chart here, gold had its start from apr2001 and retraced more than 62% (blue) so for mine that run start point was no longer relevant - at that time the run had been negated
The start of the next run(purple) - aug2001 also retraced more than 62% so I would no longer place significance on either or both of those - BUT an uptrend has established - significant
The next run (pink)
starts dec2001 ends feb 2002 (that is all the info you have at that time) but it only retraces 50% indicating strength established and the start point is still valid so the continuation of that run gives a total run from dec 2001 to jun 2002 (red) and retraces 50%
that makes the continuation still with a valid start of dec 2002 (orange) which also retraces 50% before giving a green valid (overall) run from dec 2001 to the first hump of the DT in 2004
now the issue becomes at what time do you switch charts to monthly bars?? - subjective but soon I would suggest if an investor.
but it all depends on your timeframe
I don't presume to tell investors how to view the stability of their investment but to me I think things are more relevant after two years on monthly bars IF you are a long termer.
If medium term stay with the weekly bars, and keep trading the runs within the overall run with the frequent fib retraces.
My key point is: the more obvious the run the stronger the chance of a regulation retrace.
Oh and before you start arguing about the original start point, when u put up the monthly bars, the starting point sometimes moves but remember it has become less relevant at this time to weekly charts and you still are unsure where the end point is anyway (are we expecting world financial stability after it gets to $1600???)
The thing to be aware of (in a "background" sense) as a lengthy run establishes, more people start looking for retrace points and they (key fib levels) therefore become more likely: day traders + week traders + MT investors + LT investors + fundies all looking for obvious fib levels - so the pygmalion effect enters the equation: remember gann, elliott, and others have their followers added to the mix all using fib levels
And yes I would agree (as we look back now) the start point was april 2001 and No, I didn't pick it - the runs within the LT run I find easier to see.