Posted in
Technical Analysis
By: Tom Gentile
on May 12th, 2022
I’ve written about Fibonacci in past articles, but for those needing a refresher know that the Fibonacci sequence is used in some people’s technical analysis.
One takes the closing low and closing high over a period of time and then plots their software programs Fibonacci tool on the chart to assess potential support and resistance price zones in that range of days.
In an uptrend one is looking for fib support zones and in a downtrend one is looking for fib retracement zones. It is at these support or resistance zones investors and or traders make their decisions to buy or sell.
One- and Two-Year Lookbacks on SPY
The chart on a 300-day lookback on the SPY gives us an idea as to how much this market has retraced from the low to high move over this range.
The fib numbers that a lot of investors / traders use as support on pullbacks in an uptrend are 38.2% and 61.8%. 50% is also a retracement percentage used, even though 50 is not a number in the Fibonacci sequence.
For a year we have retraced all (100%) or more so I offer up a two-year lookback to try and assess a fib retracement over that period of time.
This shows the markets may slide a bit more down to 380.29 for the SPY to have that be a test of that support level.
The things with Fib’s or any technical analysis is they become self-fulfilling prophecy only if enough people use that analysis and base their buying and selling decisions on it.
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