Putting the March TSX correction in perspective

TSX decline to 13,200 represented a minimum retracement level of 34.4%

There are no firm rules when an index or stock retraces a prior move. The minimum retracement level would be 33%  and the maximum would be 66%.  If  the correction passes the 66% level, there is a high probability the stock or index will retrace the prior move.

Weekly candlestick chart of the TSX showing the March correction which represented a retracement of 34.3% of the  28.8% (3200 points) gain from the July low of 13,200 to the March 7 high of 14,300

S&P/TSX 1-Year Weekly Chart

The most important points for the above TSX chart analysis are:

  • The 50-day moving average is a good approximation of the trend line.
  • The major trend ( longer than six months) is up.
  • The intermediate trend ( three weeks to three months) is up.
  • The near-term trend ( less than three weeks) is now up.
  • The March correction was a 34.3% retracement of the July to March upswing.
  • The March correction was -7.7%.
  • The support level of  13,500 held on the pullback.

You can reference recent chart analysis of the S&P/TSX index to see where the index made an assault on the 13, 500 level.  Then there was the break and the run to the March high.

This two-year annotated candlestick chart of the TSX makes one statement: it was a good run.

Maintain a neutral trading strategy at this  juncture in the S&P/TSX index with alerts at the 14,200 and the 13,800 levels.  A  close above 14,200 would be a possible indicator to add to long positions as the index attempts a break through the recent high of 14,300.  A close below 13,800 would be a possible indicator to liquidate some long positions as you monitor major support at 13,500.

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Note: This technical analysis is for educational purposes so you can learn to trade online using candlestick charts. Please conduct your own chart analysis or consult your financial advisor before making investment decisions. The chart snippets are from BigCharts.com which I recommend and have used for fifteen years. The author of this article may hold long or short positions in the featured stock or index.

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