Contents:
- Understanding Retracement in Trading
- Breakdown of URC's Retracement Levels Across Three Downward Moves
- Retracement Probabilities and Key Levels
- Key Takeaways from the Charts
- Final Analysis and Trading Strategy
The analysis presented focuses on three separate downward power moves of Universal Robina Corporation (URC), each of which underwent a retracement phase. The data table outlines key retracement levels and probabilities of rebound, while the accompanying retracement charts visually highlight these key levels.
URC stock retracement levels from the August 2024 power move, showing potential trend continuation points.
URC stock retracement analysis for the November 2024 downward move, highlighting key probability zones.
URC retracement probabilities for January 2025, emphasizing resistance and reversal areas.
Understanding Retracement in Trading
A retracement is a temporary reversal in price movement within an overall trend. In downtrending stocks, retracements occur as price moves upward after a significant drop before resuming its downward trajectory. Identifying retracement levels helps traders determine whether a pullback is a continuation setup or a signal for a potential reversal.
Key Retracement Levels:
- 100% Retracement (Origin/Start) – The beginning of the downward power move.
- 66% Retracement – The level where price has a 80% probability of resuming its downward move.
- 33% Retracement – A more cautious zone where price has a 50% probability of continuing downward.
- 0% Retracement (End of Move) – The lowest price reached in the downward move.
In contrast, a "Sweet Spot - Reversal Zone" lies in the 50%-75% retracement area, where there is a 60%-90% probability of a price rebound.
Breakdown of URC's Retracement Levels Across Three Downward Moves
| Trade Duration | 5 Days (Aug 2024) | 8 Days (Nov 2024) | 4 Days (Jan 2025) |
|---|---|---|---|
| Start Date of Power Move | 01-Aug-24 | 06-Nov-24 | 13-Jan-25 |
| Origin Price (100%) | 119.00 | 101.30 | 79.15 |
| End Date of Power Move | 06-Aug-24 | 14-Nov-24 | 17-Jan-25 |
| End Price (0%) | 98.10 | 78.65 | 67.80 |
| Total Price Range | 20.90 | 22.65 | 11.35 |
Retracement Probabilities and Key Levels
First Downtrend (August 2024)
- 100% Retracement: 119.00
- 66% Retracement: 111.90 (80% probability of downward continuation)
- 33% Retracement: 105.00 (50% probability)
- 0% Retracement: 98.10 (Potential reversal or continuation)
- Reversal Sweet Spot: Between 108.55 and 113.80 (60%-90% probability of rebound)
Second Downtrend (November 2024)
- 100% Retracement: 101.30
- 66% Retracement: 93.60 (80% probability of downtrend continuation)
- 33% Retracement: 86.15 (50% probability)
- 0% Retracement: 78.65
- Reversal Sweet Spot: Between 90.00 and 95.65
Third Downtrend (January 2025)
- 100% Retracement: 79.15
- 66% Retracement: 75.30
- 33% Retracement: 71.55
- 0% Retracement: 67.80
- Reversal Sweet Spot: Between 73.50 and 76.35
Key Takeaways from the Charts
Each retracement analysis provides the following insights:
First Move (August 2024)
- The price never surpassed the 33% retracement level (105.00), indicating strong bearish momentum.
- This failure to break above 33% reinforced the high probability of trend continuation, confirming the downtrend’s strength.
- The move served as a bearish confirmation, signaling a low likelihood of reversal.
- Short traders should have waited for a shallower retracement before re-entering, as the price did not show signs of a deeper pullback.
- Long traders looking for a bounce should have exercised caution, as retracement failure at 33% often signals further downside.
- Key level to monitor in future setups: The 66% retracement (111.90) was never tested, reinforcing that the bearish trend remained dominant.
Second Move (November 2024)
- Price briefly reached the 33%-50% retracement zone before selling pressure resumed.
- This created an ideal short-selling opportunity, as the probability of trend continuation remained high.
Third Move (January 2025)
- This was a shorter-duration downtrend, with retracement failing to approach even the 33% level (71.55).
- The narrower price range resulted in a tighter retracement zone, limiting opportunities for counter-trend trades.
- Selling pressure was exceptionally strong, causing the price to struggle to find support before stabilizing within the 33% continuation zone and moving sideways.
These insights emphasize the importance of adjusting expectations based on retracement behavior, recognizing when deep pullbacks are unlikely, and aligning trades accordingly.
Final Analysis and Trading Strategy
- The 33% retracement level served as a key resistance zone, as price failed to move beyond this level in both August 2024 and January 2025.
- The 66% retracement level was never tested, highlighting the strength of the bearish trend and the absence of deeper pullbacks.
- The failure to rebound beyond 33% suggests that counter-trend trades were ineffective, reinforcing the importance of trend-following strategies over reversal setups in these scenarios.
Trading Decision Points:
- Short positions (continuation trades) remained valid even before reaching 66%, as price consistently reversed near the 33% retracement zone.
- Long positions (reversal trades) lacked confirmation, as price never entered the 50%-75% reversal sweet spot, requiring traders to wait for a stronger bullish signal before considering entries.
This refined retracement trading approach helps traders capitalize on both trend continuation and potential reversals, optimizing trade setups while minimizing unnecessary risk exposure.
Disclaimer: This post is for informational purposes only and should not be considered financial advice. Always do your own research before making any trading decisions.
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- Micro Stock Trader: Comparing the Modified 10-Step Trading Strategy vs. Retracement Trading Strategy
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