*note: as my post count is too high, I cant post images so you will have to copy the url links and post them into your address bar to see the charts. *
50% retracement level is an important level after a sharp swing of price that should be taken into consideration.
To calculate the level simply take the high/resistance of the starting point and add the low/resistance of the ending point then divide it by two. This is roughly the level to watch out for.
Now I will look at ANZ.
A double top in Oct and Nov followed by a heavy fall found support at around $12.7, this meant a possible retrace resistance at around $15.7. The projected resistance of 50% retracement at $15.7 was reached in early Jan and reversed the rise. This wouldv been a good short as the resistance is unlikely to be broken as the price hesitated and slowed as it nears the level in addition to the Bollinger Bands tightening. The share price penetrated the bol band then on the same day went back down, confirming the resistance. The price then entered a downtrend.
Following the downtrend, the price fell down to $12
As support was found at $12, we can now make another projected resistance (15.7+12 divide by 2, = 13.85). At around this level, the price was challenged and in the early hours of trading day appeared to be a bull day but then closed back down at the open. This is a bearish evening gravestone doji evening shooting star (3 patterns combined in 1) with the high right at the higher bollinger bands. REAL BEARISH.
A closer look:
You may want to enter the short the day after the doji for the bear confirmation if you wish to be conservative. If you're more risk tolerant entering near the close on that day is enough as its at retrace res+bollband res+shooting star+gravestone doji.
After that downward movement the price found support at about $12 again. We can then calculate this retracement level and determine possible resistance at $13 (fall started at $14 down to $12, 50% at $13).
This level was met and the price failed to push through. At this point I do not like to short as there is strong possible resitance at $12 found at previous two falls which forms a double bottom. The fall from $13 to $12 possible resistance is too little for a straight short(put) so I decided to employ bear call spread with legs above the $13 resistance which worked out very well.
That concludes my analysis of ANZ, I shall look at more stocks in the next couple of days.
*NOTE: im not suggesting you take all 50% retracements as support/resistance but rather as a point to consider. Do not take this as a pure trading system. I usually look for more confirmations before entry like I did with the short in early Feb. With shorts I take put options or spreads as I do not recommand shorting/longing straight shares without leverage as the moves are not huge.