If I was you, I’d spend more time looking into MU’s Financial Statements in order to discover the reason why its stock price has fallen over 36% in nearly 6 months, from $18.47 to its current $11.74.
I’m afraid neither Fibonnaci’s tools, or Bollinger’s Bands or William’s Indicator will give you the reason for that fall. All they can do is show you the interaction between buyers and sellers.
MU has been Turning Over in excess of $1.3 to $1.5 billion per Quarter.
HOWEVER ... it only manages to show about 4% to 5% of its Revenue at its Bottom Line !!
It has a fairly good Operating Margin, but after that things aren’t so hot.
There’s a large Depreciation deduction. What assists MU’s position is its "Other Income" number, and the question often is, with regard to such Income, "is that going to be a regular and reliable part of MU’s traditional business ?"
Another aspect of MU’s fundamentals that is suspect is its current tax rate of only +/- 4% to 6%. When that goes up to a more reasonable percentage it will further reduce MU’s Bottom Line.
Now the Technical tools you’ve been referring to rely, to a large extent, on EMT, i.e. the "Efficient Market Theory" which implies that a stock’s price is exactly where it should be "because all the pushes and pulls of the Marketplace have led to that conclusion".
If we look at MU’s price in July 2006 we see it at about $14 a share. It went up by about 32% in the following 3 months to about $18.50. Presumably "the Market" thought it was worth it.
However, the state of its fundamentals at that stage wasn’t really any different to what it is now. And now, that same "Market" has been selling off the stock to the tune of a 36% fall. Doesn’t look very "Efficient" to me.
Now Fibonnaci may have been a great mathematician who discovered a unique mathematical series. But why should any stock’s price movement regularly comply to that sequence ? What logic supports that supposition ? There could be times that a stock’s rise or fall may comply with those ratios. But, there again, there could be times when it won’t. There’s no support in mathematics or business science that says that a stock’s price should comply with Fibonnaci’s series. If it does, it’s more by coincidence then anything else.
However, there is definitely information contained within a company’s Financial Statements that will certainly persuade informed investors as to whether or not they should invest in the company.
It’s that sort of information that the likes of Warren Buffett, et al, have used over many years to accumulate great wealth from their investments.
I respectfully suggest that putting greater emphasis on this sort of information will prove to be more reliable than Fibonnaci's series.
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