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Trading Blog

  • Trends are examined using chart analysis to determine price direction and strength of each sector. 

  • Trading opportunities are identified by using various charting indicators, including 12 Points Trend Strength indicator.  

  • Out of the 11 sectors we follow, the trader can usually find opportunities at any time.

Latest Posts

Posts with trade setups are based on probability factors and are posted for educational purposes. Make trades at your own discretion.
Posts with the latest updates are moved to the top of the list.

Silver futures reversal fibonacci extensions daily chart

September 27: Silver broke down and triggered new downside Fibonacci extension targets  Silver more than most vehicles “always” returns down to previous support levels on the way up.  In this instance it touched on that, then went up and now back down for a second, deeper test of support.  See our article on silver retracements.

October 1 update:  Silver futures had a low of 16.94 so far.

November 8 update:  Silver futures had a low of 16.66 this morning, just shy of the 100% level. Bulls hope that was the bottom.

December 6 update:  The pattern still holds, with a low today of 16.47 before rebounding slightly above the 100% level.

February 12 update:  Silver continues to meander within the Fibonacci range shown on the chart.

February 28 update:  Silver had a low of 16.40 today, keeping this downward probe pattern intact.

Looking for Trade Entry Points on Silver Miners Daily Chart

Feb 6: The charts for SIL silver miners ETF and SILJ junior silver miners ETF have similar formations today. Notice the two bear leg formations flagged on the chart. They are both of similar depth and duration. Also they both show ultimate oscillator divergence. As the price had lower lows, the ultimate oscillator had higher lows as indicated by the green lines on the chart above. This divergence usually serves as a warning of a coming price reversal.

At this time we are watching the February 4 low of 29.75 to see if it marks the start of a new bull leg. If that level holds, then based on fibonacci extensions, the buy point is when 31.41 is exceeded. The 50% and 100% price targets are shown in the chart. However, aggressive traders would buy now based on the UO divergence with trailing stops starting below the trend break trigger line.

February 13 update:  The trade was triggered, then price fell a bit.  The pattern remains valid.

February 21 update:  The high today was 33.12, surpassing the 50% level.

February 28 update:  SIL was crushed in the selloff in silver.  SIL was down as low as 26.25 today, nullifying this setup.

VNQ Real Estate ETF Bearish Divergence

February 14:  VNQ real estate ETF is exeriencing bearish divergences on the ultimate oscillator.  This usually warns of a coming correction or consolidation period.

February 25 update:  As predicted there has been a significant correction.  The low today was 95.29.  With the coronavirus uncertainty we would wait this one out for a while along with SPY and EEM.

EEM Daily Chart Buy Signal

Feb 4: EEM has triggered a fibonacci extensions buy signal.  Ultimate oscillator is supportive since the price drop on January 31 had a divergence with UO being up.  Be aware that risk of global events sparking further market turmoil is present.

One way to trade this is to buy when price has gone above the 23.6% fibonacci level. We use the 25% level as a buy trigger.  Put stops just below point 3 with OCO orders to sell half at the 50% level and the rest just below the 100% level.  When the 50% level is reached, raise remaining stops to your buy level to lock in gains.  This type of trading is automatic if entered correctly.

In this instance we chose the 1, 2, 3 points due to the proportionality of the two down legs: July-Aug 2019, and Jan-Feb 2020.

February 25 update:  Price went below point 3 on the chart, which nullifies this setup.  The supply disruptions from Asia are weighing heavily on the stock market.  It looks like a good time to stand aside from EEP and SPY until clarity returns.

VNQ Real Estate Divergence

December 14:  VNQ is showing a divergence between price and ultimate oscillator, which indicates probable bottoming.

December 20 update:  VNQ had a high of 91.97.

December 28 update:  VNQ is still moving up, with a high this week of 92.18.

January 17 update:  VNQ remains bullish with a high of 95.03 today.

February 12 update:  VNQ had a high of 98.25 today.

SPY chart with fibonacci extension analysis

January 14:  The setup in the chart predicts that the price of SPY is set to reach 337.79.  This is based on the lows and highs marked as 1, 2, and 3 on the chart.  The buy trigger is marked with a green line.  The 50% level is marked with a blue line.  The obvious magnetic attraction of price to the buy level and the 50% level plus the decisive moves above those levels support the validity of this setup.  The 100% level at 337.79 is pulling the price up.  

January 25 update:  The high to date was 332.95.  Price fell to 328.77 January 24, which was blamed on news events.  We will watch to see how this longest and most overvalued bull market unfolds.

February 1 update:  Price is at 321.73 and still looking bearish.

February 4 update:  The 50% level has held as support while price today was up 1.5%.  The 100% level remains in play.

February 12 update:  Price reached 337.28 so far today at 10 am.  This is close enough to our 100% target to call it.  Universal oscillator is showing a bearish divergence at this point, so that in combination with reaching the target shows that this can be either a good time to take profits or tighten stops, or partially do both.

Fibonacci Extension Chart Forecasting

 The mass psychology of traders and investors causes waves on price charts. Optimism of the crowd changes to pessimism and back to optimism. This is the basis of Elliott wave theory. It is also the basis of the Fibonacci projection system. The challenge is to interpret these waves for profit.  Charles Lindsay gave direction on how to trade this in his 1991 book, Trident a Trading Strategy.  It is said that this method goes back to the 1970’s or even the 1940’s.

The fibonacci extension method is based on finding useful pivot points in wave patterns. The pivot points start at point 1 with the low of the beginning wave, 25.93 in the example. Pivot point 2 is at the top of the first up wave at 26.49.  The next wave is down ends with pivot point 3 at 26.27. Some charting programs have a drawing tool for this. The chart above was done on Thinkorswim. You can also calculate the levels yourself as described later.

In the example chart, some news or events caused a wave of optimism from the low of 25.93. We chose 25.93 to 26.49 as the first wave, since it only had slight interruptions along the way. There is no requirement to choose just one possible pattern. We could have chosen the secondary low of 26.18 on January 15 as point one. It takes practice to select the best 1, 2, 3 points to meet your goals. You can look for quick, small gains on intraday charts, or zoom out to monthly charts to look for patterns that may take years to complete.

The Fibonacci projection is calculated by simply taking the difference in price from point 1 to point 2 and adding that to the low price at point 3. You can take 25% of that up leg as the buy point.

Buy signals are triggered as price penetrates the first fibonacci level at 23.6%. We use 25% as a clear breakthrough buy point as Lindsay did. The theory is that due to mass psychology and the magic of fibonacci numbers, once the 23.6 level is exceeded, the 50% level is most of the time reached also, and the 75% and 100% level are more likely than not.

In the example chart the price easily slipped past the buy point, paused at 50% exactly and looks to be on the way to the 100% level. The Fibonacci levels act as magnets, attracting and repelling price.

There are various ways to trade this. The one useful rule is to use a beginning stop just below the number 3 point. We like to put in an order to sell half at the 50% level. When that is triggered, we can raise stops to the buy point to lock in gains. Then either sell the rest at a higher target, or sell half the remaining at a higher target and continue the rest with trailing stops. 

Lindsay recommended using 50% and 75% (the actual fibonacci level is 78.6%) as sell points and/or use trailing stops to see how high it can go.  Taking profits at 50 and 75% gives a higher percentage of winning trades than waiting for 100%, but limits profit potential.  Each trader must determine their own targets.  A combination of partial profit taking at specific levels and letting some ride with trailing stops can be useful.  There is nothing but good about taking a safe bite out of every up leg.  Not being greedy is the key to a successful and sustainable trading career.

The second chart below was done on StockCharts.com, but is the same chart two days later.  Stock Charts doesn’t have the same fibonacci extension tool.  They use a different definition of the term.  This chart shows two manually calculated additional alternative wave counts that could have been useful for trading.

Also see our Trading Resources page.

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