Fibonacci Chart of the Week
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We believe that the Fibonacci retracements are the underlying structure of all markets and in these weekly examples we give educational and actionable information.
As usual we will go back to show you where it has come from and what key levels they held first, then bring you up to date.
In our last update on Salesforce/CRM we took you from the 2020 low up to dateThis example will go back to the beginning of trading in CRM to show you how important the Fibonacci retracements are to the trend and what to look for after holding them. If you are a day trader, or a long term investor you should always know where these levels are, as they will tell you just how strong, or weak the market is.
A couple guidelines before we start.The 23.6% and 38.2% levels should always send you to new highs, or lows depending on the direction of the trend.The 61.8% and 78.6% levels should send you back the equal amount of where they just came from.You can find all of the rule/guidelines as well as other examples on our website.
All of the following retracements marked on the chart below are back down to the all-time low, unless marked otherwise.The first major setback in 2009 went 78.6% back of the all-time high and low. The rally from there, not only went 78.6% back of that break, but on to new all-time highs. The first major setback happened at the end of 2011 when they hit 38.2% back to the ATL. What we should have been looking for is a new high and this was accomplished in March of 2012. The next setback could only go to 23.6% in June and July of 2012 at 31.50. Once again it led to new ATH at 47.58. The break from here, also could only go 23.6% back to the ATL, this was 36.56 in June of 2013. We were expecting new highs and they took the market up to 67.00.
This is going to happen a few more times before we done with this example.The break from 67.00 went 23.6% at 51.25 in April of 2014, this again led to a new ATH. In this instance we are dealing with the major moves, however you can run retracements from each of these levels mentioned to tighten up the view.
Now comes the big move from 82.90 in November of 2015 to 52.60 in February 2016. This was a quick hard break, but at the end of the move it went right back to 38.2% keeping the long term trend positive. The rally took them to a new ATH, as it should based on the "38.2% rule". The new high was made in May 2016 and the break from there could only go 23.6% back keeping the market extremely positive.
This next massive leg up to 161.19, also had a lot of retracements in it measuring back to the February low, that you can measure for yourself. With the big move to the new ATH we can start to bring in other major areas to retrace to and the February 2016 is a very good one, it stands out clearly as a low and it held a major retracement. The setback from the 161.19 high came into a combination of retracements. First was 123.00, this was 23.6% back to the ATL and the second was 118.75, this was 38.2% back to the Feb. 2016 low. There was a couple close's below 123.00, but never below 118.75, keeping the long term trend intact. This once again led to a new ATH at 167.56. The break from there was only able to go 23.6% to the 2016 low, this was 140.60 in August of 2019. They did go on to a new ATH at 195.72. Then the pandemic hit and this next move should show you how important the retracements are and to know all of the major ones. The break from that high had everyone running for the hills, however at the end of the move down, it ended up going 38.2% back of the ATH and ATL. It never closed below this level and then went on to a new ATH once again.
This is were we started the previous CRM update at, if you can't find it in the Barchart commentary section, you can find it HERE.
As you can see on the chart they are now sitting right between 220.50 and 218.50, the first is 38.2% of the years range and the second is 23.6% back to the all-time low. As long as it can hold this area and because it is a combination of 23.6% and 38.2% we are looking for new all-time highs. As always we will watch all the retracements back up to see just how strong, or weak the market is, so watch 241.50, this is 38.2% back to the ATH and if this is all they can do, it is a negative sign. Failing to hold 218.00 should send them down to the next combination area of 181.00 to 177.00, this is 61.8% of the years range and 38.2% back to the ATL.