By: Tom Gentile
on February 24th, 2023
The markets are experiencing their worst week since early December of 2022. The inflation reports out in this, and the previous week show inflation is still running hot. So much so that the Fed, some would say, has no choice but to continue to raise interest rates. The feeling by many is that as rates go higher the market goes lower.
How much Lower? Where is a potential support area the markets will at least maybe stop and bounce from?
This batch of analysis may help find a level for a stall to the recent downdraft in prices and that level may be right here.
We have past articles one can research and learn a bit about Fibonacci Retracements in technical analysis of stock and ETF’s.
If you wish to pursue more education on it a great resource is www.investopedia.com.
One other aspect of Fibonacci analysis is the observation you can look at Fibonacci on a chart in multiple time frames and certain Fib levels may stack on top of each other. Multiple Fib levels stacking on top of each other gives some technical traders a bit more confidence in a price level holding and potentially bouncing (or dropping) from due to more than one Fib level showing up as support.
Figure 1 shows the SPY over a 150-trading day time frame. It is emphasized on the chart image there really isn’t a support one can make out since it is not trading on or at a Peak Chart line (peak chart lines emphasize support and resistance).
There isn’t a pivot high or low that one can clearly make out to assess a support level.
But you can look at Fibonacci Retracement levels.
Figure 2 shows a 100-day candle chart for SPY with the Fib tool overlayed on it and you can see there is a fib retracement level of 38.2% SPY is testing today.
Now look at Figure 3, the 50-day candle chart for SPY with the Fib tool overlayed on it. You can see in this different time frame there is still a Fib retracement level of being tested as support. That is happening at the 50% retracement level.
Different time frames on the same security AND they both have a fib level being tested – even with the fib level % retracement levels being a different number, the price is still virtually the same on both.
This could be extra conviction this price level holding as support and being a price level the SPY bounces higher from.
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