How Far Will Stocks Fall? - SPDR S&P 500 Trust ETF (NYSEARCA:SPY) | Seeking Alpha
This is an outstanding article by Eric Parnell which explains the ups and downs of the stock market. Fibonacci pattern retracements occur often, and Eric has done a great job of explaining these movements. Whether you believe in Fibonacci numbers or not, Wall Street has enough investors who do abide by the numbers to make it a predictable sequence that should be observed.
Since we do not know when the market will fall, we need to apply these principals to tradeable bottoms rather than tops. In other words, if we see stocks falling hard, we should note the last significant peak and figure out where a 38.2% retracement from the peak would leave us. Then, we could buy quality stocks or ETFs at this probable bottom. If we are in a recession or bear market, the bottom will be somewhere near 50% or 61.8% from the top.
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