As I have stated previously in this space, the most common method of applying Fibonacci retracements is to start at a cycle high and end at the cycle low. However, I ascribe to the Connie Brown methodology of deferring to the secondary highs of a cycle as the starting point for the Fibonacci retracement when the chart makes it clear that this is the proper application.
The Costco chart, in my opinion, is a textbook example of this, confirmed by the gap up at the 61.8% Fibonacci retracement. As indicated in the chart above, Costco has broken out of the secondary pivot cycle highs and is retesting that breakout. I believe this is a unique entry point to consider inexpensive October calls at or around 270 or 275 – the 161.8 extension. I like this trade because we will know quickly if the secondary high holds as support or not, and we can exit the trade with minimal downside if it fails. However, if we are correct, we will enter prior to the buyers waiting for a break of the last September’s peak. A worthy trade for consideration.
