Sunday, May 14, 2006

SOX - Oversold

The SOX has retraced almost 50% of the October - January rally. It has had two successive closes outside of the BB and Friday's close is bang on its 200 day MA. Also the 50% retracement level is significant because it lines up with notable support. Consequently, we should expect a bounce back to the 510 area or the 50 MA in the coming week.

3 comments:

AJ said...

Hi Jamie,
While drawing the fibonacci retracement, I've seen it being drawn on the charts where 0% is at the bottom and 100% is the highest point in the chart. In your chart it's the other way around. Would you happen to know the difference, and when to use one over the other?
Thanks, AJ.

TJ said...

Hi AJ,
Yes, I am measuring the retracement of the last leg up. In a situation where you want to measure the retracement of the last leg down, the high point becomes 100% and the low point 0%.

In my example of the SOX, if prices fall back to the October low level, we will have a full 100% retracement of the October - January move.

AJ said...

Thanks!
AJ.