P1: a/b c08
August 12, 2008
Printer: Yet to come
Real Traders, Real Time
I first met Derrik around 2002 when I lived in Tucson, Arizona, and he was visiting our mutual friend, Larry Pesavento. Derrik had been a longtime Dynamic Trader software owner and subscriber to the DT Reports. Derrik later published his own trading book, Fibonacci for the Active Trader (TradingMarkets Publishing Group, 2004). Derrik trades for his own account and advises on risk management and hedging strategies for farmers. I’ve re-created the charts he sent to me. The trade description and commentary are all his except my comments in parenthesis italics and in the “Robert’s Comments” and “Robert’s Follow-Up” sections.
The Setup for Long Soybean Trade: Possible ABC at Price and Momentum Support In addition to my own trading, I work with many farming operations to develop risk management strategies and assist with hedging decisions for their crops. My analysis and recommendations are centered around the Dynamic Trading high probability strategies. My analysis considers five areas: 1. Wave analysis. 2. Two standard deviation regression channels. 3. Fibonacci price zones (where multiple extensions and retracement levels converge
to form a support or resistance zone). 4. Candlestick charts. 5. DT Oscillator for momentum.
In the middle of April 2007, the November soybean contract was in the midst of a significant decline after spending much of the winter in a strong uptrend. Many producers/farmers began to get concerned that the ride was over, and fear was beginning to set in. I was receiving daily phone calls regarding the idea of just “. . . taking our profits and getting out before it gets real ugly.” After running my analysis, it was clear to me we were probably in a classic threewave correction (A,B,C). I am especially partial to these corrections when Wave-C lands on the bottom of my uptrending regression channel. It looked like that may be the case with November 2007 soybeans as of mid-April. I also found a large number of Fibonacci price retracements and extensions that came together between $7.60 and $7.30. These support zones were right on the bottom of the regression channel. (See Figure 8.20.) Robert’s Comments I’ve only included some of the key price projections Derrik provided on this chart, including the 61.8% and 78.6% internal retracements, 127% and 162% external retracements and the 100% alternate price projection of Wave-A from the Wave-B high. The most probable Wave-C target should be around 7.60, which includes one projection from each set, including the 61.8% internal retracement and 100% alternate price projection.