Traders Daily: What Fibonacci Tells us About the Dow Jones

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When it comes to technical analysis, it’s all about confirmation of support and resistance.

If we fail to identify either, we take on far too much risk.  We may buy – or even sell at the wrong time.  And as many of us know, it can be costly – and frustrating.

So, the more you know, the better off you are.

One way to identify key lines of the two is by paying attention to Fibonacci Retracement levels.

Retracement levels are based on the belief that stocks, currencies and indices tend to retrace their paths after a big move in a single direction.  You first find your two extremes – a peak and a trough – and divide by key Fibonacci ratios, such as 23.6%, 38.2%, 50%, 61.8%, and 76.4%.

All are used to forecast the technical potential pullbacks or moves higher.

Once those levels are clearly identified, we then draw our horizontal lines at each % marker to define points of support and resistance.  For reasons that are still not clear to all traders, these ratios play a big role in the market to determine critical points.

Look at the Dow Jones Industrials (DJIA), for example.

After drawing our lines, we can see that Fibonacci Retracement Levels pinpoint key levels of support and resistance to watch.  For example, between November 2018 and December 2018, the 61.8% line served as support.

We can also see that in late January 2019, that same 61.8% line is resistance.

In addition, we can see that in late December 2019, the 38.2% retracement line served as resistance, as well.  In fact, the DJIA did pull back from that point temporarily.

In short, this is a technical indicator that may serve you well.

Of course, you never just want to rely on Fibonacci Retracement Levels.

Relying on just one indicator without confirmation can also be costly and frustrating, too.  Personally, not only will I watch key lines of support and resistance, but I’ll confirm with other indicators such as Williams’ %R (W%R), MACD, relative strength (RSI), and Bollinger Bands.

At the end of the day, you have to ask yourself this key question:

If I can’t be bothered to study a chart, should I really be buying?

Open Positions:

Tilray Inc. (TLRY) – $82.25

Canopy Growth (CGC) — $35.55

Aurora Cannabis (ACB) — $6.45

After running above $100, TLRY did pull back to $72.24, and remains a long-term hold.  CGC is up to $43.60.  ACB is now up to $6.20.

Square Inc. (SQ) stock – $59.25

Square Inc. (SQ) March 15, 2019 75 calls — $3.90

First Trust US Equity Opportunities ETF (FPX) – $63.05

iPath S&P 500 VIX Short-Term Futures (VXX) — $42.80

These were our Top 3 stocks to buy and hold for 2019.  So far, SQ and FPX are beginning to accelerate higher, as markets recover from recent lows. SQ is up to $68.84.  FPX is up to $67.52.  And while the VXX did pull back with the market rally, hold.

Johnson & Johnson (JNJ) stock – $130.25

JNJ February 15, 2019 135 calls – $2.65

JNJ February 15, 2019 140 calls – $1.45

As Johnson & Johnson slowly recovers from its lows, we’re still holding.  It appears that a good deal of negativity has been priced into the stock.  We’re looking for a recovery to $135 shortly.

Extreme Networks (EXTR) – $6.65

While the stock did pull back slightly, we are still holding with a $10 price target.

New Age Beverage (NBEV) — $6.76

We have a near-term target of $10.  It last traded at $6.49 a share.  Hold.

Ceragon Networks (CRNT) – $3.90

Boingo Wireless (WIFI) – $32.04

Zayo Group (ZAYO) — $34.42

All are long-term holds as the 5G revolution just begins to pick up momentum.  CRNT now traded at $3.74.  WIFI is now at $22.19.  ZAYO now trades at $27.33.  Hold all.

Kroger (KR) stock – $29.75

KR last traded at $29.20.  Give it some patience.  We have a $35 price target, near-term.

Electronic Arts (EA) stock –$114.40

Unfortunately, the calls did not work out as well as we would have liked.  We exited the call options for a loss, but still hold the stock.

Six Flags Entertainment (SIX) — $66.25

SIX last traded at $59.37 and remains on hold.

Twitter (TWTR) stock — $31.90

Hold the stock.  It now sits at $31.10.

CoreCivic (CXW) stock – $25.25

The GEO Group (GEO) stock – $25.32

As long as immigration remains a hot issue, we’ll hold these two stocks.  CXW is now trading at $18.95. GEO is now up to $21.95.

Parsley Energy (PE) stock – $28.05

PE last traded at $18.11. Hold, as oil prices becoming ridiculously oversold.

Nucor Corporation (NUE) — $66

NUE trades at $57.03 and remains a hold with a price target of $68, near-term.

Skechers USA Inc. (SKX) — $29.25

We’re holding the SKX positions with a near-term target of $35. SKX last traded at $25.49.

ETFMG Alternative Harvest ETF (MJ) — $32.30 – exited half

Kush Bottles (KSHB) — $7.85

MedMen Enterprises (MMNFF) — $4.30
Canopy Growth (CGC) — $51.55

Marijuana stocks are benefiting from further from U.S. approval across the country, Canadian approval on October 18, 2018, and corporate interest in marijuana stocks, as we’ve seen recently.

Pro Shares Ultra Short S&P 500 (SDS) — $45.15

This remains a hedge against the long positions.  It’s now at $38.75.

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