Fibonacci pick of the week
We believe that the Fibonacci retracements are the underlying structure of all markets and in these weekly examples we give educational and actionable information.
All of the rules/guidelines along with other examples can be found here, https://www.one44analytics.com/fibonacci-retracements-rules/
This week's pick is Draftkings, a young stock, but already showing good movement and an excellent stock to apply the Fibonacci retracements and their rules too.
To start you must always use the extreme high and low and then work your way into the tighter highs and lows. The run up from the March 2020 low took them up to 44.79 on 6/2/20. The break from there went (1) 23.6% back at 36.16, it traded below it, but never closed under it. Using the 23.6% rule the market should have gone on to new highs, by failing to make the new high our target on the break from there was 38.2% back to zero. Retracing a market back to zero is applicable when dealing with new stocks and stocks that have made major advances and their low was under $10, but never in Futures. The low of 27.54 on 7/14/20 was (2) 38.2% back to zero. Using the 38.2% rule, this is the level that must hold to keep the long term trend positive and be followed by an advance to new highs. It took 2 months to get the new high and in between that time we have an example of the 61.8% rule. The 61.8% rule is, "any market that holds 61.8% should send it back 61.8% of where it just came from". On the rally from 38.2% on 7/14/20 it hit (3) 38.84 on 7/21/20, this was 61.8% back to what was the all-time, so now we should be looking for a 61.8% retracement the other way. The 61.8% retracement happened on 8/10/20 at (4) 31.12, completing that target.
Now for what is relevant today,
The current break from the all-time high on 10/2/20 at 64.19 has come into a combination of retracements. The first and most important is 38.2% of the all-time high and low at (A) 43.50. The second is 61.8% back to the 7/14/20 low, this is (A) 41.70. We know based on the 38.2% rule that the market must hold this level to keep the long term trend positive and that new highs should follow. Also, the 61.8% rule says to look for a 61.8% retracement to where it just came from, this is (B) 56.00. So, as long as they can hold the area between these two key retracements, we are looking for new highs longer term and shorter term for a rally up to 56.00. As always, just because we have set targets above, we still watch all the retracements on the way up. If the rally from this area can only get back to 38.2% of the current break at 50.30, this would be a negative sign, For the downside, with a couple close's below 41.70 the long term target will be 61.8% of the all-time high and low at (C) 30.50.