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Technology Stocks : Newbridge Networks -- Ignore unavailable to you. Want to Upgrade?

To: pat mudge who wrote (8555)	12/15/1998 4:02:00 PM
From: Ed Frye	Read Replies (1) \| Respond to of 18016

Hi Pat, Retracement levels are a TA tool and can be applied to any and all of what you mentioned. I was applying it to NN. The concept of retracement is straightforward. Markets usually do not trend straight up, nor do they fall vertically downward. They usually retrace some of the advance, or decline, before resuming the prior trend. The common retracement levels are 50%, 38% and 62%. There is a connection between these retracement levels and normal probability distributions. All 3 numbers also correspond to the famous Fibonacci ratios. The 50% retracement level is also used in Gann, Elliot Wave and Dow Theory. Anyway, say NN bottomed at point A = 16 and topped at point B =31. Length of advance (L) = (high @B - low@A) = 15. 50% retracement (R50)= (.50 * 15) = 7.5. Support @R50 = 31 - 7.5 = 23.5 Support @R38 = 31 - ~6 = ~25 Support @R62 = 31 - ~9 = 22 Technical buying is likely to occur as each of these retracement levels is approached. These levels strike me as too low. If we were to instead use the price at the close on the night earnings were announced: low@A=25; L=6; and, Support @R50 = 28 Support @R38 = 28.75 Support @R62 = 27.25 Given the market action we've seen since earnings, these numbers make much more sense to me. Notice the strong support NN has demonstrated @~28. ed