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Selective Forex Trading: by Don Snellgrove

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Chapter 5. S90/Crossover with Gaps, Holes, and Fibonacci Levels

The perfect S90/Crossover is found on a Fibonacci level when the horizontal line that is drawn from the original support or resistance of the founding trading range actually cuts precisely through a gap in the market. I am referring to the combination of a gap, Fib level, and an S90/Crossover.

This chapter provides 15 charts that illustrate these gaps; the captions on the figures explain the gaps, to help you understand the potential target values.

GAPS

Because the normal rule or thought about gaps is that they must be filled, the odds of filling the gap become extremely good, and you can see how many other types of confirmations will signal the return of the market to fill the gap. When an occurrence like this happens, you will observe that a perfectly precise S90/Crossover strike is often followed by an immediate reversal. If you're trading toward the gap, this type of target offers a second reversal entry with an extremely tight stop of normally less than 10 pips. As the market bounces from the strike, the reversal target should be a Fibonacci level based on the previous trading range, such as a .618, .50, or even .382 level.

Figure 5.1 illustrates a gap and how gaps are filled by bodies, not wicks.

HOLES IN THE MARKET

Patterns that appear on charts often have great significance; one of these patterns in particular is what I refer to as holes in the market. Figure 5.2 is an illustration of a hole in the market—the space ...

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