NISM Certifications · NISM-Series-XV: Research Analyst · Technical Analysis
A stock has risen from Rs 200 to Rs 300 in an uptrend. It then retraces 50% of this entire advance. Using the retracement idea from Fibonacci analysis, at what price would the retracement be expected to find support?
The expected support is Rs 250. The advance from Rs 200 to Rs 300 is Rs 100, and half of it, Rs 50, is retraced from the top, giving 300 minus 50. The 38.2 and 61.8 percent levels would give different prices.
- ARs 250Correct
- BRs 238
- CRs 262
- DRs 150
Explanation
The advance is Rs 100 (300 - 200). A 50% retracement is Rs 50, so the support level is 300 - 50 = Rs 250. Rs 238 would be a 61.8% retracement (300 - 61.8) and Rs 262 a 38.2% retracement. Rs 150 wrongly deducts 50% of the top price.
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