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You are here: Home / Recent / Watching The Retracements

Watching The Retracements

July 19, 2000 by Eddie Kwong

Here is an interesting chart of the Nasdaq-100
Tracking Stock
(
QQQ |
Quote |
Chart |
News |
PowerRating)
. Last week, we saw the widely anticipated breakout from
the Nasdaq’s five-week trading range. Then you had four straight days of
followed-through accompanied by widespread pronouncements that the summer rally
was finally under way.

It looks like we were due for a pullback. For the QQQ this the lines on this chart have been on my mind for the past
few days:

The Fibonacci Retracements (often spoke of by Kevin Haggerty, Dave Landry,
and Lewis J. Borsellino) pretty much tell the full story. If calculate the 61.%,
50%, and 38.2% retracements off the March 24, 2000 high and the May 24, 2000 low
in the QQQ, you arrive at the levels shown.

The market found study support in June and July at the 38.2%. From there it
broke out of its range last week and made a spirited four-day run. Once it got
to the top of a downtrending channel and its 61.8% retracement the QQQ came to a
screeching halt and began the pullback that is unfolding right. During
Wednesday’s trading session the QQQ paused for three hours at the 50%
retracement level.

As this is being written, the QQQ is starting to breakdown from its
three-hour trading range.

The value of this exercise is that it shows you possibilities reaction levels
at which you can watch for setups. There’s always the temptation to try and
predict. Not succumbing to this temptation is what I believe separates
successful traders from those merely give advice.

Until tomorrow,

Eddie

Filed Under: Recent, Trading Lessons

About Eddie Kwong

Prior to joining TradingMarkets.com, Inc. in 1999 as a market analyst, Eddie Kwong was a co-founder and Editor of Realtraders.com, an informational Web site for professional traders. Over the past 25 years of trading, Mr. Kwong’s experience in the markets has also extended into software development and teaching.

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