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22

JC PENNEY (JCP): DAILY PRICE ACTION @ 1.27 PROJECTION

1.27 PROJECTION @ 36 9/16

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•SBigChart&.com

16 17 18 19 22 23 24 25 26 fir 2 3 4 5 8 9 10 U 12 15 16

It is price action like this that is truly astounding. JC Penney sold off from a high around 78 3/8 and lost more than half of its value in nine months. The stock sold off slightly past the 1.27 and reversed. The 1.27 projection served as significant support, as JC Penney rallied nearly 20 points within the next few months after reversing.

3?/2



Bearish 1.27 Projection

The bearish 1.27 is an important Fibonacci projection. After a stock has broken above a previous high, the 1.27 is the first area I look at for potential resistance. Lets look at the illustration.

bearish 1.27 projection sell at b!

After a stock breaks out above a previous high, it is easy to believe the rally will continue for a while. Quite frequently, a stock will experience resistance above the break out point at the 1.27 and not yield much of a rally. Therefore, the bearish 1.27 is an important price area to examine to determine the strength of a breakout. Lets look at some examples, as they will illustrate the concept.

The following chart ofBroadcast.com shows how the 1.27 can act as substantial resistance. In this example, the stock reversed after exceeding the 1.27 projection of the prior decline. The reversal was confirmed by the bearish price bar, which materialized the day the stock hit the 1.27 projection. Although the 1.27 was exceeded, the stock reversed on the day it



hit the projection. So, even if you waited one day, the stock was clearly heading down, as the following day ended with an extremely bearish close.

When a stock reverses at a major Fibonacci like the 1.27, the price action must be examined closely. In this example, Broadcast.com reversed sharply after hitting the projection. The 1.27 was calculated at 170 1/8, while the stock topped out at 177 1/4. In fact, the stock reversed on the day that it hit the projection.

160 140

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BR0ADCAST.COM (BCST): DAILY BEARISH 1.27 PROJECTION

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