For the final example, let's look at Macy's (M), which I recommended on July 11. The stock had peaked in early May at $42.17, and the new highs were confirmed by the monthly as well as the weekly RS and OBV analysis.
Looking at the rally from the August 2011 lows, the 38.2% support was at $34.66, and had already been decisively broken in June. The 50% support was at $32.35, with the 61.8% support at $30.04.
Despite the corrections in June, the RS line had held well above its long-term uptrend (line b) and the OBV also held above support. The daily chart shows that the low at $32.31 came on July 12. The daily relative performance did not confirm the lows, as it formed a short-term positive divergence.
The daily OBV bottomed in June (line e) and also formed a bullish divergence at the lows. The major upside targets were the prior high of $42.17 and then the 127.2% Fibonacci retracement target at $44.67.
A week after longs were established, Macy's had surpassed the previous swing high, confirming a bottom. By early August, the weekly OBV had moved back above its WMA.
The 50% retracement resistance from the April high was surpassed in early August, and just a few days later the 61.8% resistance was also being challenged. With earnings out in just a few days, I then decided to recommend selling half the position. The earnings were strong and Macy's rallied further on the report.
Though the market is now much higher, I felt comfortable taking a quick 14.6% profit, as the overall market was not looking that strong and an earnings downdraft can never be ruled out. If the technical readings for the overall market had been stronger I would have been more likely to hold on to the entire long position.
I hope this lesson will give some of my regular readers a bit more insight into how I come up with my recommendations. In my daily column, I often do not go into as much detail, and thought it might be helpful.
I have found over many years that Fibonacci levels give my analysis an additional degree of discipline and have often kept me out of trouble. In the past few years, I have also learned quite a bit from John Person about his unique method of pivot-point analysis. When his pivot points and the Fibonacci analysis identify the same price levels, one has an even higher degree of confidence.
Even if you are trading or investing based on the daily charts, take the time to look at the weekly and monthly analysis, as I think it will help you in the long run.