# 50% retracement resistance/support



## polartw (21 March 2009)

*note: as my post count is too high, I cant post images so you will have to copy the url links and post them into your address bar to see the charts. *

50% retracement level is an important level after a sharp swing of price that should be taken into consideration.

To calculate the level simply take the high/resistance of the starting point and add the low/resistance of the ending point then divide it by two. This is roughly the level to watch out for.

Eg.






Eg2.





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Now I will look at ANZ.





A double top in Oct and Nov followed by a heavy fall found support at around $12.7, this meant a possible retrace resistance at around $15.7.  The projected resistance of 50% retracement at $15.7 was reached in early Jan and reversed the rise. This wouldv been a good short as the resistance is unlikely to be broken as the price hesitated and slowed as it nears the level in addition to the Bollinger Bands tightening. The share price penetrated the bol band then on the same day went back down, confirming the resistance. The price then entered a downtrend.

Following the downtrend, the price fell down to $12





As support was found at $12, we can now make another projected resistance (15.7+12 divide by 2, = 13.85). At around this level, the price was challenged and in the early hours of trading day appeared to be a bull day but then closed back down at the open. This is a bearish evening gravestone doji evening shooting star (3 patterns combined in 1) with the high right at the higher bollinger bands. REAL BEARISH. 
A closer look: 





You may want to enter the short the day after the doji for the bear confirmation if you wish to be conservative. If you're more risk tolerant entering near the close on that day is enough as its at retrace res+bollband res+shooting star+gravestone doji.

After that downward movement the price found support at about $12 again. We can then calculate this retracement level and determine possible resistance at $13 (fall started at $14 down to $12, 50% at $13).





This level was met and the price failed to push through. At this point I do not like to short as there is strong possible resitance at $12 found at previous two falls which forms a double bottom. The fall from $13 to $12 possible resistance is too little for a straight short(put) so I decided to employ bear call spread with legs above the $13 resistance which worked out very well. 

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That concludes my analysis of ANZ, I shall look at more stocks in the next couple of days.

*NOTE: im not suggesting you take all 50% retracements as support/resistance but rather as a point to consider. Do not take this as a pure trading system. I usually look for more confirmations before entry like I did with the short in early Feb. With shorts I take put options or spreads as I do not recommand shorting/longing straight shares without leverage as the moves are not huge.


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## motorway (10 April 2009)

> Theoretical Overview and Definitions
> The cornerstone of GSCS is the old ‘50 Percent Retracement and Measured Move’
> rule. This rule, familiar to most traders is almost as old as the organized markets
> themselves. It has been traced to the times when insiders manipulated railroad stocks
> in the 19th Century.




Very true... ( the bit about being very old )

Think of a pendulum
It swings up and it swings down..

But what of the point where the hand holds that pendulum ?

50 percent rule  involves   a number of very significant principles..

Support / resistance .... breakout and reversal

All can be defined and qualified  by the half way points and how they are moving.

Dynamically

IF the top and bottom of the patterns have the _appearance _of randomness

The halfway points do not ..





> The logic of THE RULE is quite simple. At a 50% retracement, both buyers and
> sellers of the previous trend (Up or Down) are ceteris paribus ‘in balance’. Half of
> each holds profits and half of each holds losses.







> The 50% point is indeed an equilibrium point. As such, the equilibrium must ‘give
> way’ BUT EITHER SIDE (buyers or sellers) in either a downtrend or an uptrend may
> prevail at any given matrix or price level.
> 
> ...





One view of halfway points with a mechanical slant

Still interesting I think


http://www.fxpraxis.com/download/GoodmanIntroReturnPDF.pdf

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> Fluctuations in Finance
> 
> As do economists, physicists view the economy as a collection of
> interacting units. This collection is complex; everything depends
> ...




Obviously one key is what all these fluctuations are fluctuating around
Whether the movement is away from or back to, that thing is the centre..

And in all this complexity.. it is the action itself that reveals .




> A method of judging the stock market by its own action.







motorway


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## DB008 (21 April 2009)

This one is great IMO

http://clicks.aweber.com/y/ct/?l=CA_GB&m=1bT7_ANGNzN95r&b=Qde3.qhVjYZVVb2w6CL2cQ


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## pavilion103 (12 May 2011)

What are people's thoughts on this one? I came across it in my scans this evening. No huge pattern with long term support and resistance, but a 50% retracement nonetheless!


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## tech/a (12 May 2011)

Thats not a retracement 

Its a low which just happens to be 50% of the previous range.


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## skc (12 May 2011)

pavilion103 said:


> What are people's thoughts on this one? I came across it in my scans this evening. No huge pattern with long term support and resistance, but a 50% retracement nonetheless!
> 
> View attachment 42885




That's the old Rams Home Loan. Lots of corporate actions with low-ball buybacks, possible delisting and capital return etc.

It's not a stock for the chartist imo.


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## Boggo (13 May 2011)

pavilion103 said:


> What are people's thoughts on this one? I came across it in my scans this evening. No huge pattern with long term support and resistance, but a 50% retracement nonetheless!




Agree with both skc and tech/a.
You need the bigger picture to have a pattern/trend before you start looking at micro behaviour within the larger picture.

On this site there are some good videos on the left under 'Resources' - free videos.
It pops up a membership thingy at the end of each video, just go back to the home page and select the next video.
Note how the shorter term entries work with the larger trend.
http://www.fibonacciqueen.com/public/main.cfm


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## pavilion103 (27 October 2011)

I've noticed that Wycoff also talks about 50% retracement in relation to the direction of the trend (i.e. if the trend is up and it retraces more than 50% = bearish sign).

At what level of retracement do people think that an uptrend is in threat? More than 61.8%? (obviously other factors to consider also)


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