It might seem counter-intuitive that swing traders would be trend traders. But in fact, no trend is ever a straight line. There are always pullbacks (swings) within trends that offer attractive entry opportunities. We can either enter as the pullback begins - a swing high in a bull trend - or look to get in as the underlying trend looks set to resume - a swing low in a bull trend.

The Fibonacci retracement strategy is based on the Fibonacci sequence of numbers in which each new number is the sum of the previous two.  All we need to know is that certain percentage retracements, based on the Fibonacci sequence, have been found to be useful predictors of future support and resistance levels. 0% represents the swing high or low before any pullback or retracement has happened. The 100% level indicates a complete retracement to the previous swing high or low.

To identify a cup and handle pattern, we will look for a swing high forming the left rim of the cup, followed by a pullback into a flat or gently curving bottom before price recovers to form a second swing high - the right rim of the cup. From the right rim, we will then look for the price to pull back to form the handle of the pattern. As noted above, the handle should ideally slope sharply downwards, as we are looking for a strong move into support.

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