Friday’s stock market plunge will see market bulls seek the Dow Jones Industrial Average to provide key support linked to the market’s swings dating back to the 2007-09 financial crisis, technical analyst Chris Kimble said on Tuesday Friday.
In the chart below, the founder of Kimble Charting Solutions applied Fibonacci analysis to the blue chip gauge’s DJIA, -2.82% from the monthly highs of 2007 and the lows of 2009. He found that the “423% Fibonacci Extension Level” which Dow seemed to have influenced over the past six months.
Kimble Charting Solutions
Many technical analysts pay attention to the so-called Fibonacci ratio, attributed to a 13th-century Italian mathematician known as Leonardo “Fibonacci” of Pisa. It is based on a sequence of integers where the sum of two adjacent numbers is equal to the next higher number (0,1,1,2,3,5,8,13, 21…).
Technical analysts see key retracement targets for rallies or sell-offs at 38.2%, 50%, and 61.8%, while 23.6% and 76.4% retracements are seen as secondary targets. Chart watchers also use multiples like 23.6%, 161.8%, 423% and so on.
“If the Dow closes the month below 33,000, chances that the Dow will see more selling increase. What the Dow is doing in support seems very important to bulls and bears,” Kimble wrote.
A test of 33,000 would mark a 2.4% decline from Friday’s close at 33,811.40. The Dow plunged 981.36 points, or 2.8%, on Friday — its biggest one-day percentage drop since October 2020, giving it its lowest close since March 15. The S&P 500 SPX, -2.77%, is down 2.8%, while the Nasdaq Composite COMP, -2.55% is down 2.5%.