INDICATORS

TREND: PARABOLIC SAR; Trend Line; FIBONACCI RETRACEMENT; FIBONACCI EXTENSION

VOLUME: MFI
MOMENTUM:
PRICE: MFI; PARABOLIC SAR
TIME:

MFI (Money Flow Index) - is a technical oscillator that uses price and volume for identifying overbought
or oversold conditions in an asset.
KEY TAKE-AWAYS:
- The indicator is typically calculated using 14 periods of data.
- An MFI reading above 80 is considered overbought and an MFI reading below 20 is considered
oversold.
- Overbought and oversold doesn't necessarily mean the price will reverse, only that the price
(factoring for volume) is near the high or low of its recent price range.
- The creators of the index, Gene Quong and Avrum Soudack, recommended using 90 and 10 as
overbought and oversold levels. These levels are rarely reached, but when they are it often
means the price could be due for a direction change.
- A divergence between the indicator and price is noteworthy. For example, if the indicator is
rising while the price is falling or flat, the price could start rising.
LIMITATIONS:
- The MFI is capable of producing false signals. This is when the indicator does something that
indicates a good trading opportunity is present, but then the price doesn't move as expected
resulting in a losing trade. A divergence may not result in a price reversal, for instance.
- The indicator may also fail to warn of something important. For example, while a divergence
may result in a price reversing some of the time, divergence won't be present for all price
reversals. Because of this, it is recommended that traders use other forms of analysis and risk
control and not rely exclusively on one indicator.

PARABOLIC SAR - is used by traders to determine trend direction and potential reversals in price. The
indicator uses a trailing stop and reverse method called "SAR," or stop and reverse, to identify suitable
exit and entry points. Traders also refer to the indicator as the parabolic stop and reverse, parabolic SAR,
or PSAR.
KEY TAKE-AWAYS:
- A dot below the price means the price is moving up, and a dot above the price bar means the
price is moving down overall.
- There is a dot for every price bar, meaning the indicator is always producing information.
- Dots below the price always rise, and dots above the price always fall. This way the dots track
the price and will capture price reversals when they occur.
- A reversal occurs when the dots flip. If the price falls below rising dots, then the dots will move
above the price to show that a downtrend is emerging, for example.
- A reversal in the indicator doesn't necessarily mean a reversal in the price. A PSAR reversal only
means that the price and indicator have crossed.
LIMITATIONS:
 - The parabolic SAR is always on, and constantly generating signals, whether there is a quality
trend or not. Therefore, many signals may be of poor quality because no significant trend is
present or develops following a signal.
- Reversal signals are also generated, eventually, regardless of whether the price actually
reverses. This is because a reversal is generated when the SAR catches up to the price due to the
acceleration factor in the formula. Therefore, a reversal signal may get a trader out of a trade
even though the price hasn't technically reversed.

FIBONACCI RETRACEMENT (PULLBACK) - is a term used in technical analysis that refers to areas of
support or resistance. Fibonacci retracement levels use horizontal lines to indicate where possible
support and resistance levels are. Each level is associated with a percentage. The percentage is how
much of a prior move the price has retraced. The Fibonacci retracement levels are 23.6%, 38.2%, 61.8%
and 78.6%. While not officially a Fibonacci ratio, 50% is also used.
KEY TAKE-AWAYS:
- The indicator connects any two points that the trader views at relevant, typically a high and low
point.
- Once the indicator has been drawn on the chart, the levels are fixed and will not change. The
percentage levels provided are areas where the price could stall or reverse.
- Levels should not be relied on exclusively. For example, it is dangerous to assume the price will
reverse after hitting a specific Fibonacci level. It may, but it also may not.
- Fibonacci retracement levels are most frequently used to provide potential areas of interest. If a
trader wants to buy, they watch for the price to stall at a Fibonacci level and then bounce off
that level before buying.
- The most commonly used ratios include 23.6%, 38.2%, 50%, 61.8% and 78.6%. These represent
how much of a prior move the price has corrected or retraced.
LIMITATIONS:
- While the retracement levels indicate where the price could potentially find support or
resistance, there are no assurances the price will actually stop there. This is why other
confirmation signals are often used, such as the price actually starting to bounce off the level.
- The other argument against Fibonacci retracement levels is that there are so many of them that
the price is likely to reverse near one of them quite often. The problem is that in advance
traders struggle to know which one will be useful on the current retracement they are analyzing.

FIBONACCI EXTENSION - Fibonacci extensions are a tool that traders can use to establish profit targets
or estimate how far a price may travel after a retracement/pullback is finished. Extension levels are also
possible areas where the price may reverse.
KEY TAKE-AWAYS:
- Common Fibonacci extension levels are 61.8%, 100%, 161.8%, 200%, and 261.8%.
- The Fibonacci extensions show how far the next price wave could move following a pullback.
- Fibonacci ratios are common in everyday life, seen in galaxy formations, architecture, as well as
how some plants grow. Therefore, some traders believe these common ratios may also have
significance in the financial markets.
- Extension levels signal possible areas of importance, but should not be relied on exclusively.
LIMITATIONS:
 - Fibonacci extensions are not meant to be the sole determinant of whether to buy or sell a stock.
It is advisable for investors to use extensions along with other indicators or patterns when
looking to determine one or multiple price targets. Candlestick patterns and price action are
especially informative when trying to determine whether a stock is likely to reverse at the target
price.
- There is no assurance price will reach and/or reverse at a given extension level. Even if it does, it
is not evident before a trade is taken which Fibonacci extension level will be important. The
price could move through many of the levels with ease, or not reach any of them.

ELLIOT WAVE