• Three Key Fibonacci levels to be aware of

    by  • March 27, 2013 6:00 am • Breaking News, Broad Market Analysis, Chartist Corner, Charts to Watch, Lighter Side, Quick Hits • 0 Comments

    Today, I’d like to take a look at a couple Fibonacci retracement levels that have caught my eye.

    A Fibonacci retracement is a technical pattern that refers to areas of support or resistance. Most charting packages have Fibonacci functions programed, but if not, these levels can be computed by taking the distance between two extreme points and then dividing the vertical distance by the key Fibonacci ratios of 23.6%, 38.2%, 50%, 61.8% and 100%.

    As you will see below, Fibonacci support and resistance levels can be a critical tool in deciphering future price action based off of past price action. Often times you will see equities stall out or consolidate around these key levels before ultimately breaking through or being rejected based upon supply/demand characteristics at that time. 

     

    QCOR – Questcor Pharmaceuticals

    • Large decline in September 2012 after Aetna decided to no longer reimburse QCOR’s sole drug for most diseases (Acthar Gel) used to treat a range of disorders including multiple sclerosis, nephrotic syndrome and seizures in babies. The product was most recently approved to treat skin and muscle problems
    • QCOR has since retraced 50% of this extreme move and is now perched between the 38.2% level and 50% level
    • 50% retracement level on QCOR also coincides with the site of previous 2012 lows

     

     

    MHP – McGraw-Hill Companies, a global information services provider best known as the parent of Standard & Poors

    • Large decline on February 4th, 2013, after the United States launched a civil action lawsuit against the company over alleged illegal behavior tied to the recent financial crisis
    • Standard & Poors has since stated that there is “No Merit” to the lawsuit and shares have rebounded. MHP recently closed right on the key 50% level
    • Also interesting that the 50% level is the site of the close after first leg down upon receipt of lawsuit, 2/4/2013

     

     

     

    NFLX – Netflix

    • Huge multi-year decline stemming from concerns over valuation and growth prospects. At this time, NFLX also separated its streaming movie business and its DVD by mail service, Qwikster, while the streaming business retained the brand “Netflix”
    • Netflix also decided to increase the monthly subscription for a joint streaming and DVD rental service by as much as 60% which caused an uproar among customers and bloggers
    • Recent strength on better than expected earnings was greeted with a pause at key 50% level, shares do look poised for a move to 210, which is the 61.8% retracement level, however.

     

     

    Hopefully you found these three key fibonacci levels useful. I know I will be monitoring these equities to see if the key levels act as support or resistance. Often times once the 50% level has been breached, the 38.2% or 61.8% level will be the “next stop” traders are looking to for the next level of support or resistance.

    Did you know that Leonardo Fibonacci published the Liber Abaci in 1202? Whereby Fibonacci introduced the so-called modus Indorum (method of the Indians), today known as Hindu-Arabic numerals. The Liber Abaci also introduced the Fibonacci sequence to the West.

    The book was well received throughout educated Europe and had a profound impact on European thought.

     

    About

    Chris Prybal is a Quantitative Analyst who contributes fundamental, technical, and sentiment research as well as analysis to SchaeffersResearch.com. Chris holds a Bachelor’s degree in Finance from the University of Cincinnati and his research has been quoted on Bloomberg TV, CNBC, Barron’s and Forbes Magazine. Chris has analyzed and traded derivatives for over 15 years in addition to his research prowess. Chris can be followed on Twitter @ChrisPrybal

    http://www.schaeffersresearch.com/

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