Predicting that [intlink id=”1245″ type=”post”]Greek stock market will bounce off the Fibonacci level[/intlink] 3 days ago was verified by an important reversal candlestick pattern in the Greek composite index’ daily chart. Today the index opened with a gap indicating a strong reversal, while it’s approaching the 20-day moving average. If you were confident enough to enter the market on Monday, you should be looking for exit points after the short term uptrend, one of which is around the 1,600 mark being both a round number and a possible resistance level. It’s also the 61.8% Fibonacci retracement level of the March’s downtrend.
The candlestick reversal formation would be even better if yesterday’s green candlestick had been longer than the latest red one. Nonetheless it’s still a great reversal pattern and one that will help traders set their stop losses right below it. As the composite index of the Greek stock market did verify that 61.8 fibonacci level, there is good chance that the uptrend resumes. However sitting back and letting those profits evaporate, in case the index falls back to the support level, is a no-no strategy. Traders should be looking to secure some of their profits and let a portion of their positions catch a bigger move.
In order for the index to climb above the resistance level at 1,675, breaking economic news must take place. A much more likely scenario is the index to fall back but not below 1,500 points, and then begin testing that resistance level. So for the patient trader, trading out half of their position either today or close to 1,600 points is the proper strategy, while the impatient trader should trade out all of their positions nowadays. The difference lies in the likelihood the index resumes its uptrend and the impatient trader would need to find another good entry point to make additional profit, while the patient one will have already taken some profits but accumulate even more from the same exact position. Having entered at 1,500 points, it would be a risk-free and highly profitable trade.
If traders have not yet bought any Greek stock, they should wait for a better entry point rather than entering the market in the middle of the short-term trade. Their stop loss would be set 100 points further down, while the profit targets aren’t much higher.