03.10.2011

Support Found today at Fibonacci Retracement. What now?












The market sold off today and managed to find support this morning at the $34.70 level. The $34.85 area was the fibonacci that is shown on the Hourly Line chart from the breakout lows to the top of this market. These key areas are seen by many different people and often can become a self fulfilling prophecy as these are levels where sellers may stop selling and buyers looking in as this is a successful dip. Because if found support at the 38.2% this means that this trend is still bullish and if it breaks this then it becomes neutral. The Fibonacci level below this is $33.66 which is the 61.8% retracement and the master level needed for this most recent rally to not become that of a failure. When you find support where you are supposed to then it is very important to hold 61.8% from the newer levels. We can do some math calculations (below) and find out where the significant support levels will become

Fibonacci Calculation (High - Low) x .618 + Low as well (High - Low) x .382 + Low

Low = $34.70

High = $35.40

Difference = $0.70

0.7 x .618 + 34.70 = 35.13

0.7 x .382 + 34.70 = 34.97


This means that the market must stay above $34.97 for this bounce to not be a failure. We already once found support at $35.13 at 3:40pm EST today and that was a successful hit. However breaking this level to the downside surely gives us reason to test the $34.97 mark and at a must hold level. If the market moves higher then you would need to adjust the calculations as new numbers come into play. If the market rallies higher then the fibonacci that will be important will be the lows placed today and the top placed earlier this week. The low is the same at $34.70 and the high is $36.76 for a difference $1.94

2.06 x .618 + 34.70 = $35.98

2.06 x .382 + 34.70 = $35.49


$35.49 has not been tested, but close. It got up to $35.42 and if the market can hold the $34.97 level and find some legs to rally higher then this will be a nice significant area. It will at least put this intermediate bear market idea on a hold because it would make this move that is now bearish to neutral. If it breaks the $36.00 area then watch out because a failed move can often create a fast move and this would give us signs that the buyers are not done yet with a lack of sellers in the market.


The five day moving average was broken today and as of 4pm EST this average is $35.71 and is still rising. Either we find some resistance at this level and this will fuel the energy needed for this average to flatten out and decline and then caution signs will hit this market. With a rising five day moving average all sell offs are guilty until proven innocent and this would prove it innocent for this selling on a short term level. However, when you go below an average like this and break above it then this spells out another failure. The failure was not being able to roll the market over after falling below and this usually plays out with a fast move in the opposite direction. The opposite of lower is higher and thus the fast move would most likely make new gains breaking $37.00. However the secret to timing the market is to adjust to the message of what the market is saying as every tick that goes by makes changes. If you make judgments on the markets and some particulars don't go the way you expect then it is time to re-evaluate your thinking.

Not sure why this comes with a line on this. One of these days I will try and figure this out, but I was able to get this chart done today. I think it looks good.



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