Discussion 12

Make comments on the two response and make sure to add your point of view.

Response 1 Fibonacci Retracements

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For my technical analysis tool, I have chosen Fibonacci Retracements. As a low risk investor, it makes sense for me to gravitate to static numbers found in nature, and I was intrigued, upon reading about Fibbonaci numbers in general.

In the financial sector, these numbers ( typically 23.6%, 38.2%, 50%, 61.8% and 78.6%) represent fixed points that are used as indicators for low and high points in a trend. The calculation of such numbers is quite complex ( based on the Golden Ratio), and use of Fibbonaci Retracements are typically not used in isolation. They represent, in many cases, fixed “stop loss lines” or “price targets.”

The real use of this tool , it seems to me, is to make strategic points for transaction rather than to make predictions within normal seemingly random volatility. In this sense, the tool would be useful for high, medium and low risk investors.

https://www.investopedia.com/terms/f/fibonacciretracement.asp

Response 2

A momentum indicator is quite useful for technical analysis. One takes price differences over a period of time to determine momentum, which is quite useful during rising markets (since bull markets last longer). This difference can be a good indicator of the strength of the issue price. For instance, I invested in the Vanguard Real Estate ETF and it has a 6 month momentum of 6.23, using this I would advise a long trade since this is a positive trend, but if this were negative, or I was examining a ten day indicator where the trend was negative, a short trade would be advised. This momentum value can be usual and a move away from the looking at the fundamental value.

https://www.investopedia.com/terms/m/momentum.aspmake comments on two response and add your own points of view.