December 19, 2008

Fibonacci retracement

By Planet Wealth

When Looking at a stock long term, there is usually several patterns and analysis tools in play at once. BLD over the long term has had several in play.

From 2004 August 2007 on the weekly chart, a large Head and Shoulders (H&S) pattern formed. In October 2007 the pattern was confirmed with a breakout and a target of above $3.50 to be reached. BLD reached the target after a sharp fall in October 2008 to mid November 2008. This H&S target is also an area of strong support.

After hitting the support the BLD has started to bounce back. When the Fibonacci tool is used the 50% retracement at $5.00 is on another area of strong resistance. It is possible that this could be the next level the stock will reach before changing direction again.

(click on image to enlarge)