Some of the common Fibonacci ratios are 50%, 38.2%, 23.6%, and 61.8%. These ratios apply to the downside as well as the upside although the stock market will not stop exactly on these numbers since there are many factors involved in the market. These ratios are a good approximate guide, though.
For example, ERX, the 3X Energy Bull ETF, fell approximately 50% from its high of $85 to its recent bottom averaging around $40 during the stock market downturn between July and September of 2011. It was useless to buy ERX while it was descending to the bottom of its range, but as soon as the bottom was established at around $40 per share, it was time to buy. In charting, bottoms are known by flat lines, bowls, and W patterns. ERX has shown a stable trading W pattern in the past few weeks.
Money can be made in bear markets by trading the multiple rallies in stocks. Since ERX involves oil, the strongest commodity on earth, it will not be held down long. For every 1% increase in the price of oil, ERX moves up 3%. This means that ERX can easily advance 20% in a few days during the rallies. It has also done this in reality by making a number of advances from around $40 to $48. You could have made 20% on each of these rallies, and at least three of these excursions have occurred at the time of this writing. You would have gained 60% on your money if you had bought near $40 and sold each time at $48. This could have been done in a mere month's time also. Imagine how much money you will make in a year's time if you can make 60% each month.
So, remember that the Fibonacci numbers apply approximately to the upside and the downside. If a good stock is down 50%, it will probably have rallies in the range of 23.6% from the bottom which you could round off to 20%. Simply buy a good stock like ERX at the bottom and add 20% to that price for your sell order. In this way you will make a fortune in the stock market.
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