NISM Certifications · NISM-Series-XV: Research Analyst · Technical Analysis
A stock rises steadily from Rs 400 to Rs 500, retraces to Rs 440, and then resumes its uptrend. Using Fibonacci retracement levels, which level did the pullback reach most closely, and what is the exact price of the 61.8% retracement of the Rs 400-500 move?
The pullback reached about the 61.8% Fibonacci level, which is at Rs 438.2. The up-move is Rs 100, and 61.8% of it is 61.8, which subtracted from the high of 500 gives 438.2. The actual low of 440 was very close.
- AThe 61.8% level, at Rs 438.2Correct
- BThe 38.2% level, at Rs 461.8
- CThe 50% level, at Rs 450
- DThe 61.8% level, at Rs 461.8
Explanation
The move is Rs 100. A 61.8% retracement lowers the price by 61.8 from the high of 500, giving Rs 438.2. The pullback to Rs 440 is a 60% retracement, closest to 61.8%. Rs 461.8 is the 38.2% retracement level, a result of measuring from the high with the wrong percentage.
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