Working Money magazine.  The investors' magazine.
Traders.com Advantage

INDICATORS LIST


LIST OF TOPICS





Article Archive | Search | Subscribe/Renew | Login | Free Trial | Forgot ID?


PRINT THIS ARTICLE

FIBONACCI


New Lows Approaching?

02/20/09 08:47:25 AM
by James Kupfer

Where in support should the Dow Jones 30 break the November 2008 lows?

Security:   DJIA
Position:   Sell

On February 17, 2009, the Dow Jones Industrial Average (DJIA) dropped almost 300 points to close at 7552. This close brings the DJIA within points of breaking the November 2008 lows. With any follow-through to the downside, the DJIA would trade at its lowest levels since 2002 when it reached a low of 7197.

Before breaking below 7200, the bears will have to break through significant support. As noted, it is the bottom of the 2000–02 bear market. Further, 7119 is the 50% Fibonacci retracement level from the lows of the Great Depression to the November 2007 market peak.

Since we are in the strong grip of a major bear market, I think it is almost inevitable that we will reach and, in the not-too-distant future, break below the 7200 level. Should that forecast come to fruition, where is the next major support level? We can use Fibonacci analysis to develop guidelines for where the market may be headed.

FIGURE 1: FIBONACCI TARGET LEVELS. Here are clustered Fibonacci support levels.
Graphic provided by: Excel.
 
On Figure 1, you can see the major highs and lows of significant time periods for the DJIA — for example, the market bottom of 1987 and the market top in 2007. In this case, 61.8% of the difference between these market extremes leads to a price target of 6422. For the three examples noted, the average is 6369. This is not a hard and fast number, but if and when the DJIA approaches this level, it would be prudent to look to cover short positions and consider establishing long ones.



James Kupfer

Mr. Kupfer is a market professional and amateur stock market commentator. Disclosure: It is likely that Mr. Kupfer has or will enter a position in any security he writes about.


Click here for more information about our publications!


Comments or Questions? Article Usefulness
5 (most useful)
4
3
2
1 (least useful)

Comments

Date: 02/23/09Rank: 3Comment: 
PRINT THIS ARTICLE






S&C Subscription/Renewal




Request Information From Our Sponsors 

DEPARTMENTS: Advertising | Editorial | Circulation | Contact Us | BY PHONE: (206) 938-0570

PTSK — The Professional Traders' Starter Kit
Home — S&C Magazine | Working Money Magazine | Traders.com Advantage | Online Store | Traders’ Resource
Add a Product to Traders’ Resource | Message Boards | Subscribe/Renew | Free Trial Issue | Article Code | Search

Copyright © 1982–2019 Technical Analysis, Inc. All rights reserved. Read our disclaimer & privacy statement.