ONE44 Analytics 23.6% rule and examples

Extremely strong/weak market will only go back 23.6%

On another note, when they have reacted to 23.6% and fail to make that new high, or low it is rare that 38.2% is going to hold, it can, but less likely.

Jan.23rd 2020

Another leg up dissected on a smaller time frame, NFLX

In this hourly chart of NFLX we will start it from the 9/24/2019 low. The rally from there took it up to 38.2% (1) of the 5/1/2019 high. The break from there in theory should have taken it to a new low to keep the negative bias, the failure to do so (2) told us, with no new low to look for 61.8% of that same move, this happened on 12/20/2019 (4), however before it got there the break that ended on 12/10/2019 hit 38.2% (3) keeping the current trend positive and the 61.8% target possible. We would have been looking for a break back to 61.8% from (4) per the rule, but as always you have to watch all the retracements and as you can see it was unable to go even 23.6% back, showing a very strong market. Today's $45 rally came from a combination of 38.2% (5) to the (3) low and 23.6% (5) back to the 9/24/2019 low.

Jan. 20th 2020

The importance of retracing back to all major levels, Yen

On this Japanese Yen weekly chart we have marked all the key retracements that were hit from the 1998 and 2002 lows that keep this market in a very dynamic up trend. As you can see on the chart that even though the rally started from the 2007 low, the retracements back to the long term lows were very important. Each level that held sent it on to new highs, as it should, if the market is going to continue the current direction. This is the same for hitting 38.2% and 23.6%. Any failure to do so tells us the trend is possibly changing. For this example of a market signaling a trend change we will start with the 2007 low (1) this is the low that lead to this major bull market. Once the market really took off it could no longer get back to any key retracement to the 1998 and 2002 lows, so you have to use more recent lows as a guide. In April 2011 the market hit 23.6% (2) to the 2007 low and then went on to new highs. In March of 2012 it hit 23.6% (3) back to the 2007 low again and in this area was 38.2% (3) back to the March 2009 low. The move from there should have gone on to new highs and this was the first sign something was changing. The rally from this area was only able to get 78.6% (4) back of that break and the failure to make a new high tells us a change in trend is possibly coming. Once the market took out the combination of retracements (3) they fell apart.

On another note, when they have reacted to 23.6% and fail to make that new high, or low it is rare that 38.2% is going to hold, it can, but less likely.

Jan. 19th 2020

A trend change is about to happen, Gold

The historic run up in Gold from the 1999 low to the all-time high had only one setback to 38.2% of the run, this was in October of 2008 (1). The next run up from there could only retrace to 38.2% one time from that low (A) and lows marked (B) and (C) would only be able to get small retracements back to the previous lows keeping this market extremely strong. Hitting the all-time high of 1920.80 produced the first major setback and brought the market to 23.6% of the 1999 low and well above 38.2% of the 2008 low still keeping the market positive. The rally from this area should have taken them to new all-time highs and this is where the first sign appeared that the market was changing trend, The rally from 23.6% (2) could only get up to 61.8% (3), this happened three different times before the change in trend took place (4).

Long term combination retracements, Wheat

In this instance we will go out to the all-time high in 2008 (1334.50) and the next most important high after that in 2012 (947.25). Retracing back to these levels from the lowest low after the two highs, we will use 359.50 from August of 2016. The 38.2% (1) back to the 2012 high was 588.00 and 23.6% (1) back to the all-time high was 591.00. This combination of retracements sent them back down to test the 2016 low (2), the ideal target from those retracements should have been new lows, but it stopped at 78.6% at 419.00. The failure to make a new low now tells us to look for 61.8% to the 2012 high and 38.2% to the all-time high (3). Once they do clear the combo of retracements at 590.00 the breaks should start to hold 38.2% to the 2016 low to remain positive and keep the upside target possible. Being that (2) was 78.6% we will cover what followed that under the 78.6% guidlines.

Jan. 17th 2020

Long term combo 23.6%/38.2%, Coffee

This Coffee chart shows the importance of keeping an eye on the long term retracements. You see the Daily chart and it has done some serious consolidation and is breaking out, it looks like the moon is the target...

But, when you go out to the Weekly chart and do the retracements back to the last major highs in April 2011 at 306.25 (1) and October 2015 at 225.50 (2) they run into a brick wall at 138.00 (3). This is 23.6% back to the 2011 high and 38.2% back to the 2015 high. For now look for them to go back to the lows from this area and with a solid close above 138.00 the next target is the combination of 61.8% back to the 2015 high and 38.2% back to the 2011 high (4).

Signs of a change in trend, Cotton

This Cotton chart starts off with 23.6% back to the all-time high (A), in theory the break should send the market to new lows, however you do have to watch the rallies on the that break to see just how weak, or strong the market is. The first rally to get close to 38.2% (1) of that break came on 4/9/2019. Failing to get above it keeps the market very negative and new lows for the move followed. The next rally of any magnitude came on 10/15/2019 (2) this was a combination of 38.2% back to the 4/9/2019 (1) high and 23.6% back to the 6/11/2018 high (A). Even with that combination of retracements telling us the market should go make new lows, the break was only able to go 38.2% (3) back to the low, giving us a sign that a possible turn in the trend is in the making. After taking out the 23.6% (2) level back to the 6/11/2018 high they went right to 38.2% (4) of the same move. This is where they are currently and this is the long term swing point for now. A break from here in theory should take them to new lows, but just as we were watching the retracements on the setback from 23.6% (2) and it held 38.2% (3) of the rally, we will do the same on any break from 38.2% as well. With a couple solid closes above 38.2% (4) the next target becomes 61.8% (5) of the same move at 81.10.

Jan 16th 2020

When the market seems to be going through all the levels, it's time to go back to the long term view. GOOGL

In the first chart GOOGL was having huge swings of up to $300 over an 18 month period. Each rally and break would only hold a given level for a short time making it seem as though nothing was working based on retracements. That's when you go to the long term view to see what is really happening.

The next chart is GOOGL on a weekly basis going back to the 2008 low. As you can see it held 23.6% (1) of this long term level, along with it being 38.2% (2) of the 2015 low. By going to the longer term you can see just how dynamic this market still was, despite the 18 months (3) of wild swings.

Jan, 13th 2020

The importance of the long term view and combination retracements, Dow Jones futures and JPM

Going back to 2009 on a weekly chart of the Dow Jones futures you can see just how dynamic this run has been and held all the key retracements. The low in July of 2010 (1) was 38.2% back to the 2009 low and the low in October of 2011 (2) was as well. The two lows in August of 2015 and January 2016 (3) were a combination of 23.6% of the 2009 low and 38.2% of the 2011 low. The next low in December 2018 (4) is an example of how you can still use a long term retracement even when it has gone well through it, this low had only one daily close below 23.6% and no weekly close below and quickly got back above it and took off again. On short term retracements, when they have been violated by more than the recommended stop we suggest that you look for the next as the rules apply.

In this example we are using JPM. At the end of 2018 it looked the bull market could be coming to an end especially if you were only looking at a one year daily chart, however you must know where the long term retracements are. The weekly chart below goes back to the 2009 low (1). The spike low in August of 2015 (2) was 38.2% back to the 2009 low, this also made it a very good level to run retracements from aside from the 2009 low. The low at the end of 2018 (3) is a good example of the combination retracements turning this market back up and then on to new all-time highs. It was 23.6% back to the 2009 low and 38.2% back to the 2015 low.

Jan, 8th 2020

The last example showed how MSFT has reacted in the long term, this chart is MSFT in a 30 min. bar chart from Dec. 3rd to current date. When the market goes on a very strong rally you have to start using even tighter levels to find support and the Dec. 3rd low stand out as the one to use. Each of the 4 areas market on the chart went back 23.6% of the low just to show you how strong this market is.

MSFT has had an incredibly strong rally that started to really take off in 2013. The low in 2015 (1) and 2016 (2) held 23.6% of the 2009 low. The setback in Feb. 2018 was only able to get back to 23.6% (3) of the 2016 low and at the end of 2018 it fell just shy of hitting 23.6% (4) back to the 2009 low. From the Dec. 2018 low, the market went into any even stronger rally that could only get 23.6% back (A&B) to that low.