Investors Shouldn’t Fear This Pullback, They Should Embrace It

by Kevin Marder
Market Watch

Concerted selling in the Nasdaq Composite reared its head for the first time in five weeks Tuesday, with most market participants little fazed by the proceedings. Crude oil, once again below $40, poses an obstacle for a further move forward.

If this is the beginning of a 3%-5% Nasdaq reaction, or something more, the question becomes how far down will a retracement go. A good rule of thumb says that a normal retracement of an advance is between one-third and two-thirds of the advance.

This roughly coincides with the 38.2% and 61.8% pullback levels related to Fibonacci price retracements. The Nasdaq chart below shows that the 38.2% level rests just below the April and June highs which were widely watched pivot points before being taken out.

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