A Prosaic Mosaic Fibonacci Watchee

 Okay, so that title was a little gay.   Sue me, I’m pressed for time, ovah heah.

Cajun asked me to go over the Fibonacci rudiments.   Here’s a great overview of the origin of the Fibonacci ratios and why they’re important to traders. Sorry for the “Lazy Man’s Out” with the link, but it’s better you get it from a pro than a rambling explanation from me.

Let’s take it as a given that Fibonacci numbers are “natural ratios” that appear in nature in many different forms, from crystal growth to psychological behavior trends. It is because of the latter that Fib numbers become useful to traders, as even “crowd behavior” — ie, “the Market” tends to follow “the Golden Ratios” to an uncanny degree.

Like any trading tool, these ratios are not perfect, and for my part, I tend to really only use the Golden Ratio itself — 61.8%– and it’s inverse 38.2%, as my primary indicators. 50% percent is also popular, but my own anecdotal experience has found it not as strong as the other two.

I also tend to like using the two year chart to seek out my Fib retracements, choosing the “most likely low to high” (or sometimes, “high to low,” if that’s the case) within that period. I tried to find the broadest spectrum that includes a low that “looks” like a base, as these tend to make for the best retracement observations.

If you note the The Mosaic Company [[MOS]] chart above, I chose the January and February 2007 lows as my base rather than those earlier “spot lows,” as the Jan-Feb line seemed to coincide with a stronger resistance line from my observation. As you can see, there’s some “art” to this, and sometimes you have to play with the charts a little to see if they make sense. Usually, if you’ve chosen the proper starting point, you’ll note how the retracement lines coincide with resistance and support points on your chart.

Note: I am using the Stockcharts.com software to create my Fib chart here for you as it works best with these WordPress downloads. For most of my observations, however, I am using Prophet Charts, which tend to be a bit more exact, visually at least. For example, my Prophet charts gives the MOS 38% retrace at $108.18, as opposed to the Stockcharts at $108.38. This is wholly a function of my using the “eyeball” method on choosing the baseline, and therefore you should always take my Fib calls as “approximates.”

I don’t think this is a big deal, as Fib retracements are “approximates” in any case, and very rarely hit their lines exactly. For this reason, I think they are great “enter and exit” tools, and great for setting stops much in the same way as traditional support and resistance lines are. For what it’s worth, they’ve served me well in the past, and I would recommend that you at least play around with your Fib charting software in both short and long term scenarios. 

Ciao, bella.

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… to a concerned citizen.

“There ain’t no squarin’ it! Not this time!”

_______

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This time by Signor “AG” — the lustrous white metal we like to invest in using [[SLV]] . I’ve got SLV’s 38.2% retrace (again, a “strong level”) sitting right at about $16.80 (again, click on the chart to expand it).

Now I’ve got more silver than I know what to do with, and– to my teste-aching chagrin– even a little Silver Wheaton Corp. (USA) [[SLW]] — otherwise known as “the bane of my existence” as of late.

But if you Gollums are interested in getting in, or back into one of the two “My Preciouses” (the other being [[GLD]] which I’ll cover later), this would be an opportune moment. SLV’s next fib level (50%) is at $15.67, by the way. Even I may add if it gets to that tempting area.

Gollum!

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Well, that was oddly efficient wasn’t it?   I have to admit, I didn’t quite think Chesapeake Energy Corporation [[CHK]] would see $45.00 this quickly, and the move feels almost canine-transformative as it “gives me some paws” (sic).

However, all due respect to Mr. Limm’s Dawg, I believe I shall indulge in a “half position” of CHK at these levels (currently $45.20).   The stop can be as tight here as you like, with the position sitting right at the fib line, but I will set mine at $40.50, which is below the next area of support, and at about a 10% loss.

Happy hunting.

Update: The Mosaic Company [[MOS]] has obviously broken through that noisome $115 area, but I shall not get hoggish.  Looking to cover half my position at $109.60, which indicates the “gap fill” from the April 4th, ’08 gap up.   I will cover the rest at the next fib support of $106.05.

Ciao.

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Our long time friend and ally, the Oil Service Holders Trust [[OIH]] looks ailing here, as it has broken through near term support at $190.   Next stop I see is it’s 38% retrace (long term fib chart) at about $183.50.   As I’ve mentioned, that’s a strong line historically, and we’ll likely see a bounce there.

That said our two favourites (sic) in the space,  Transocean Inc. [[RIG]] and National-Oilwell Varco, Inc. [[NOV]] seem to be leading the charge southward.   Not a good sign.   RIG is already through it’s near term 38% fib retrace at $137.30, and heading for the 50% near term line at $129.60.  There should be even stronger support at the longer term two-year fib support at $125.10 or so.

NOV knifed through it’s near term 38% fib line at $76.70 “like butter” this morning, and seems to be on a course to touch at least its near term 50% fib support ($71.70), if not it’s longer term 38% line at $67.80.

Let it be known I am not surprised at this pullback, given the bullshit blow off in oils.   Am I also convinced this is no “top,” however.   I think these longer term 38’s will hold here and represent excellent long term entries when they show some accumulation on volume at those levels.  

Aside:  The Mosaic Company [[MOS]] is getting the homo hammer as well at the moment (disclosure: I am short MOS from the mid 120’s), but seems to be holding on to the recent July lows.   If MOS cannot convincingly puncture the $115 level with authority today, I will likely cover.

 

 

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Q4  (23 months, Hibbing, MN): I don’t even know how many of you recognize Q4 from the comments section.   For the most part, he’s restricted his posting to Fly’s blog alone.   Nonetheless, he’s a regular poster most readily identified by his eclectic music tastes, which he shares with the group via embedding usually one selected youtube video per day.

Sometimes, but not always, Q4 will add some sly market commentary-related  “title” or blurb to his piece, but I have to admit — I may just be imagining that.   Suffice it to say, I’ve become a big fan of Q4’s aural offerings, even though I probably only really like about one third of them, and some of them can only be described — in my opinion at least — as down-right awful. 

Something you maybe didn’t know:  Q4 is actually short for “Quadphonic Random Select A.I., Series IV.”  He’s the property of iBC Enterprises, LLC,  a joint venture whose unit holders include Fly and Jeremy, among other silent partners.   In addition, Q4’s final product included some non-equity consulting work during “end stage development” provided by Boomer.

Starting out as a freshman year coding project from Jeremy’s “Hardware, Music and Informational Bioengineering 101″gut course, “Q#1” was a graduated learning software-hardware artificial intelligence device that worked with web spider inputs to “sample” all the music currently available on the internets according to a set theme as programmed by its operator.   In the original case, this theme was “cannabis sativa” — randomly selected, according to all parties involved.

 That first version was a dismal failure, however, showing a marked proclivity for the pan flute musings of Zamfir and the other Greek “masters,” while developing an annoying habit “auto-calling” the local Domino’s and sending anchovy pizza to Jeremy’s dormitory at embarrassing pre-dawn hours.

While still in school, however, Jeremy met Fly at an “Intro to Banking Serious Coin” seminar during North Dakota State’s Career Day, and convinced him to further capitalize his device research.   Fly eventually agreed, but insisted the A.I. be targeted at market dynamics, to spare him the “bother” of having to dig up relevant “end-of-day” video to cap his daily commentary on Fly’s original blog — “Flyonwallstreet.com.”

Given his charge, Jeremy set to work on “Q3,” and was initially frustrated by the machine’s first tendency to select the favorite polkas of Larry Kudlow.   He worked that kink out by cutting back the device’s CNBC access, and  flooding the system with Jim Rogers interview transcripts.   Frustratingly, his progress was impeded once again when he hooked the device’s data feed into a voluble “Mad Money” episode too close to a particularly rocky market close, thereby eliciting the entire Donna Summer oeuvre played at 66 RPM–on a continuous loop– for 24 days straight.

Fortunately, Jeremy worked through these problems and others with some help from Boomer, and a steady stream of cash (UPS Packets, rubber-banded $20’s) and high quality cognac sent from Fly in New York.  Q4 was finally finished in September of 2006.    Developing organically and apace since then, he’s been “released” into the software of iBC.com, and performs his primary duty of choosing Fly’s “end of day” video as first planned.

There have been glitches, sure.   This “Vincenzo” stuff Fly jokes about when the site goes down?  That’s just Q4 working on “understanding” the Miley Cyrus phenomenon, or some other market-based musical quandary.   Like a bright child, he’s learning all the time, and I’d ask you to forgive his hungry “mind” even if it brings the site down every now and again.   

As well, Fly has allowed Q4 permission to begin interacting with his guests here, so don’t be surprised if you get a “reply” from this growing electronic brain.   But even if you do not,  be sure to check each of his musical offerings, and see if you can make the market connection that multi-petabyte personality is seeking to illustrate.  Who knows?  It might make you some money. 

PS — don’t be alarmed by this picture Jeremy sent me of the pile of hardware bubbling away in his parents’ basement.  Q4 is a work in progress, you must remember.   Besides, Jeremy assures me “all that Apple shit” looks exactly like this, underneath the phaggy white plastic marketing cover crap.

Selected Jake-atar:

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