3Com Corporation (COMS) Message Board

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Technology Stocks : 3Com Corporation (COMS)

COMS 0.00160

0.0%

Jan 16 9:30 AM EST

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To: joe who wrote (18677)	7/6/1998 12:27:00 PM
From: Bruce L	Read Replies (1) of 45548

Joe & Wayne: Re: TA giving a person an "extra feel for stock movements" and Fibonacci retracement formula FWIW - although I don't consider myself anymore than a rank beginner when it comes to TA - I think we should also consider Fibonacci Retracement Theory when we look at the pullback in COMS price from the 32 1/2 resistance area...if only because many TA theorists and money managers rely on it. Just to review Fibonacci is a leading/prospective indicator which predicts stock prices before the market trades at these levels - unlike most TA theory which is lagging and makes predictions based on what the stock has done in the past. The theory assumes that following a breakthrough of previous resistance and/or support levels there will be a predictable percentage retracement of this breakthrough price movement whether the movement is to the up or down side. The percentage numbers that Fibonacci came up with are 38% for a first level retracement and 62% for a second level. Importantly for the theory to work, it assumes that the stock in question has already put in place a top or bottom. Applying the theory to COMS I assume that the stock put in a solid market double bottom in May-June. On June 24 - the day before earnings were announced - the stock opened at 26 5/16 and closed at 27 1/8 for a gain of 7/8. In the discussion on this thread leading up to this date most of us had assumed major resistance at 27. That afternoon earnings were announced and the next day the stock moved up 4 3/8 at 31 1/2 with a day high of 32 13/16. (Joe, if you even blinked you would have missed this high; I put in a sell order at about this time and only got 31 7/8.) Depending on at what point you calculate it we had a breakthrough up move of between 4 1/2 to 5 1/2. Fibonacci theory would predict in any initial retracemnet the stock would pull back 38% or 1 5/8 to 2 1/8 before finding new support. In fact this is very close to what has happened with COMS. At least as I've watched it we've bounced off support at the 29 3/8 level and 95% of the trading has been in the range 29 3/8 to 29 5/8. Assuming no change in the fundamentals and no drastic change in the overall market, I would predict we would continue trading in this range for the short term before finally breaking through resistance at 32- 32 1/2. At least that's the way I'm betting. FWIW.

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