Anyone interested in Technical Analysis would have read about Fibonacci Retracement, projections and the fractal nature of markets. Typically, analyst use the prior up-swing to identify potential area of support in an uptrend and vice-versa. It is our attempt through this post to twist this perception about retracements and how they are measured. Have a look a the daily chart of Nifty featured below.<\/p>\n
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If you notice, the correction, represented by the CD swing, is almost equal to the prior correction marked by AB swing. Is it identical and exact ? Nothing is exact or 100% in stock market as we are trying to measure an abstract concept, of\u00a0 behaviour of buyers and sellers,\u00a0 via price action.<\/p>\n
Let’s take this discussion a step forward. Kindly direct your attention to the Daily chart of ITC featured below, which has a set of parallel trendlines. Ponder over this question “What are these lines capturing? What is so magical about them?”<\/p>\n
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I am sure most of you would have got the answer. Let me explain for the ones still struggling. These parallel lines try to capture 100% retracement of the prior swing.<\/p>\n
ITC is now traded right at the lower parallel. Will the lower trendline arrest the fall? I don’t have answer to this question. But as a trader, the odds are definitely in favour considering a long trade with a stop at Rs.270, for a target of Rs.320.<\/p>\n
Please be reminded that the usual disclaimer and disclosures apply. The attempt here is to explain the concept of retracements and not to dish out trade ideas.<\/p>\n
Trade Safe and Don’t Get Hurt.<\/p>\n","protected":false},"excerpt":{"rendered":"
Anyone interested in Technical Analysis would have read about Fibonacci Retracement, projections and the fractal nature of markets. Typically, analyst use the prior up-swing to identify potential area of support in an uptrend and vice-versa. It is our attempt through this post to twist this perception about retracements and how they are measured. Have a […]<\/p>\n","protected":false},"author":5,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[59],"tags":[67],"yoast_head":"\n