Video Transcription
Today’s video is all about how you can easily use the Fibonacci extensions tool along with our Volatility Box to get high probability target zones from which you expect price action to start to reverse.
Now for today’s example, we’re going to be focusing on Canadian Solar (CSIQ) and the reason why I’m looking at CSIQ was based on the daily time frame chart so if I come in first to the daily time frame chart.
Overview of the Daily Time Frame Setup (CSIQ)
We had CSIQ hit our scan when we had a Squeeze Signal right here. This is a free indicator for all Volatility Box members in which we combine a few Boolean conditions with the squeeze to get an idea of when we expect the squeeze to start to get going.
With the Squeeze Signal, we saw we had the signal print, and the squeeze here looked like it was about to fire along. That was initially the first point in which it hit our radar.
Now typically once we see this signal we’d like to get an entry as close to this Market Pulse line that we can get as possible. That’s a pullback zone it’s a place in which we know we’re not overpaying for this trade and I think it’s a much better substitute for moving averages for those of you trying to decide, “Hey, should I be following the 8 or the 21 or the 34 EMA?”
Now we had that pullback to the Market Pulse line right here and this made for a nicer entry for a longer-term swing trade.
1.272% Fibonacci Target
Now from this point, we’re going to be using the Volatility Box to get an idea of when we should be taking our targets off knowing that our 1.272% extensions here using our swing high to our swing low is $48.08.
Now, if I come into a one-minute chart here of Canadian Solar. Let’s go ahead and load back in the Volatility Boxes. You should notice this adds some contextual volatility clouds to price action.
Today one other way that you could also see this is by using our Stock Volatility Box Dashboard directly on our website (volatilitybox.com). On the dashboard for CSIQ, you’ll notice you have two sets of levels the left-hand side is our long levels.
This is the place in which we’re looking to get long and the right-hand side is a short level so first is short target short entry shortstop and this is primarily for day trading.
However, for the swing trade opportunity, the place that I like to take targets off is that short target. This is the first place in which we’re looking to take targets off. Then we have our short entry and really, if we extend past that then we have our third zone which is our shortstop zone.
Today, with our Fibonacci extension 1.272% lining upright between that short target and short entry I thought that would make for a really good place to start to take trades off the table. That level is where you had a lot of different exit conditions coming together.
You had not only the Fibonacci extension you hit the one-two seven two you had the squeeze looking like it was starting to get going here you also had our Volatility Box ranges telling you that we expected price action here to start to simmer down and now if we come back into a daily time frame chart here.
1.618% Fibonacci Target
If you are looking at the next potential target, you can want to repeat the same process. Our next extension here is 1.618% which is at $52.17. Tomorrow, if we see that our Volatility Box lines also happen to line up with $52.17, I think that would make for a very interesting second stretch target for anyone who’s left in any remaining shares.
The stop here would be at break-even price, which the breakeven is very close to that $39 price point, giving you a good amount of cushion.
As of this writing, we went from $39 up to currently $47.98, and now we’re looking to see if we can break above that magical resistance point of $50 (and ideally, up to $52.17). That may be entirely possible, based off not only the momentum that we’re starting to see, but also the squeeze potentially firing long.
I think we may see that stretch 1.618% get hit, and also the longer-term 1.272% target, from the weekly time frame chart (near $53.82).
Examples of Fibonacci and Volatility Box Overlapping
One other thing that I’d also like to call out here is that today was not the first day in which you had the Volatility Box and these extensions lining up for those of you that are curious along with this entire move up.
You had something similar happening giving you places to keep taking your target off. If I show you what I mean there I can come into a one-minute chart. Instead of today’s activity, let’s go back to Friday’s activity.
Let’s first remove the Volatility Boxes here. Once you click apply, you’ll notice we had a couple of different zones that were interesting.
First, we have that 1.000% retracement zone, based on that larger weekly swing high swing low.
You’ll notice that retracement happened to also overlap with a different Fibonacci zone, giving you a Fibonacci zone between the $44.50 and $44.86 levels.
If I come back into our one-minute time frame chart and we come into Friday’s activity here.. I’ll load back in the Stock Volatility Boxes, and you should notice that the Stock Volatility Box target zones overlap nicely with these Fibonacci zones.
We hit the first, second and third Volatility Box levels, via our Aggressive Volatility Box models. On Friday in itself, we saw CSIQ shot all the way up to our Conservative Volatility Box entry zone as well, so both of our models (Aggressive and Conservative) breached.
You’ve had different places where price action has given you this hint that today we’re extended in CSIQ.
We’re now beyond the nearest Fibonacci extension along with our Volatility Box zones both of which give us the hint that hey we now expect price action to start to reverse.
Conclusion
Hopefully today’s video gives you a good example of how to overlay the Fibonacci extensions.
In today’s case, that involved using the 1.272% and the 1.618% extension in conjunction with the Volatility Box price zones.
The Volatility Box helps make the process streamlined and consistent. We have long and short volatility zones that we can monitor and observe, as high probability places in which you’re looking for price action to start to reverse.