As U.S. stocks tumbled on Friday, bulls will be looking for the Dow Jones Industrial Average to hold important support tied to the market’s gyrations all the way back to the 2007-09 financial crisis, technical analyst Chris Kimble said on Friday.
In the chart below, the founder of Kimble Charting Solutions applied Fibonacci analysis to the blue-chip gauge’s
monthly 2007 highs and 2009 lows. He found the 423% Fibonacci extension level looked to be influencing the Dow over the past six months.
Kimble Charting Solutions
Many technical analysts pay attention to what’s known as the Fibonacci ratio, attributed to a 13th century Italian mathematician known as Leonardo “Fibonacci” of Pisa. It’s based on a sequence of whole numbers, in which the sum of two adjacent numbers equals the next highest number (0,1,1,2,3,5,8,13, 21…).
Technical analysts see key retracement targets for a rally from a significant low to a significant peak at 38.2%, 50% and 61.8%, while retracements of 23.6% and 76.4% are seen as secondary targets. Chart watchers also employ multiples, such as 23.6%, 161.8%, 423% and so on.
“If Dow closes out the month below the 33,000, odds increase that the Dow will experience more selling. What the Dow does at support, looks to be very important to bulls and bears,” Kimble wrote.
A test of 33,000 would mark a fall of a little more than 3% for Friday’s session low so far. The Dow was down more than 720 points, or 2.1% midafternoon, leaving it on track for its lowest close since mid-March. The S&P 500
tumbled 2.2%, while the Nasdaq Composite