One of the setups that remains very popular with readers is the Gartley reversal. This setup occurs after a corrective movement against the direction of the impulsive trend.
The 2 things that the trader looks for is the ABC swings on the chart (see below) and the clustering of key Fibonacci levels.
One of the main things to remember when dealing with Fibonacci levels is that they don’t constitute support and resistance levels in and of themselves. This means that typically the trader would wait until a trough has been formed at the cluster level before taking a long-side trade.
In terms of profit targets the first target will often lie midway between point X and point A. Generally the trader wouldn’t use a fixed target and would be more inclined to simply tighten and then trail their stop once this level is reached.
The initial stop would likely be placed either below the cluster level of the confirmation trough – or both.
You can follow Ric and me on twitter at RicCharts and DaveCharts respectively. We always like getting questions, comments and star ratings so feel free to let us know what you think.
All the best,