The rally off of Confluence looks suspiciously like a daily Double Repenetration. If it were (not shown) we'd jump on the long side like a duck on a June bug. We could do this in a number of ways.

A. Buy the first shallow retracement, after the Confirmed Double RePo

Buy stop the high, after the smallest of pull backs, after the Confirmed
Double RePo.

C. Anticipate the Double RePo, and enter the market after a pull back, but
with some Confirmed intraday Trend in our favor.

•  Enter the market on a retracement, after a Confirmed Trend up in the Time
Frame of our choice.

•  Look for a Directional signal to support our trade. Enter on the long side
accordingly.

While it was not specifically mentioned in our Directional Indicator chapter, (you wouldn't have had the basis for it), a strong Confluence area, particularly on a weekly or a monthly chart could be a Directional signal on its own. This approach is a bit risky, unless the market is oversold as in "Stretch." The way I employ this strategy is to wait for a Confirmed Trend, in this case up, then employ one ofthe Fib tactic entry signals we will cover in CHAPTER 13. A number of my students will "Bonsai" into a Confluence area. I typically use either Minesweeper A or B. My suggestion to you, is not to jump ahead now to see what these tactics are. I think it's better for you to reread this section later and stay with the chronology ofthe book.

IMPORTANT POINTS TO NOTE:

•  If you didn't precalculate these DiNapoli Levels on the monthly chart, you wouldn't
have any idea that support was about to manifest. The market was falling like a stone.
You should always study the higher Time Frame charts, so you know where you are in the
bigger picture.

•  If you look at the daily (not shown) in the vicinity ofthe first (highest) Fibnode shown
on Chart 9-7, you would have seen a nice playable rally.

•  On Chart 9-7, if you re-label 2 to A, 1 to C, and the high preceding 1 to B, F would
have been a near perfect OP.

•  There will be a much more compelling example of Confluence coming up later in
CHAPTER 11 involving the 500 point single day Dow decline. It's delayed until later
because it is a little more complicated. It involves more reaction lows and consequently
more Fibnodes. I realize it's best to learn to walk before we start to run.

THE PROPORTIONAL DIVIDER:

Let's back up a little and talk about how to get DiNapoli Level markings placed properly on a price chart without spending much money.

You can use a precision architectural tool called a proportional divider (precision ratio compass):

The proportional divider 3 is the least expensive way to properly pinpoint DiNapoli levels, since it allows you to identify Fibnode locations and Lineage, quickly and easily. I do not recommend the use of graphics (technical analysis) software 4 to accomplish this task, since you'll get a series of unidentifiable lines splayed across a chart. This type of presentation will degrade your ability to confidently act on the information at hand.

If you want to use a computer to accomplish this, you have a couple of choices. With enough talent, understanding of the concepts, andforesight ofyour trading needs in the heat of battle, you may be able to adequately program a spread sheet. Otherwise our FibNodes software produces a tabular printout with identifying characters. This presentation accurately characterizes the type of Fibnodes you are encountering in current market action. The characters act similarly to Lineage Markings. Using the software does not dispense with the utility of the divider. A high-quality proportional divider is great to have around. If you are trading intraday however, it is effectively impossible to accurately keep up with things, without adequate software.

BOTTOM LINE: Use a divider and/or adequate software for best results!