FAS Retracement

FAS dropped today, closing the gap bottom at 7.21, and retests the old flag top at today's close. Whether it holds is yet to be determined. A retreat to the flag top happens in high,tight flags 58% of the time, so that is not yet a concern. The throwback to the flag top usually indicates a lesser response of the overall pattern performance, but not a failure.

Note the 50-day moving average is now at 6.23. FAS could very well retest that, which is coincidentally near the 50% retracement (6.18) of the move upward from 2.32 to 10.05. These simultaneous levels of two indicators may prove a strange attractor that cannot be ignored.

Finally, the first retracement in a new bullish move tends to have a deep retracement, often much deeper than 50%. A 50%-only retracement would be shallower than usual, thus a bullish thing. Also, note the On-balance Volume shows a shallow retreat even though price is down almost 50%, another bullish indicator.

In short, this probably provides a new opportunity for entry, but let the issue prove itself before entering. Require some kind of bottom demonstration before entry, and always use a stop-loss once in.