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50% retracement theory

what is 50% retracement theory?

The 50% retracement rule states that an index or a stock retracts half the value of the decline or the rise.

The fifty percent principle is a technical correction that gives back 50 to 67 percent of the most recent stock price gains before the price begins advancing again. If a stock recently gained 30 percent, the fifty percent principle holds that it will give back at least half of that gain before testing new highs.

A characteristic of a healthy bull market is that it makes higher highs and higher lows. During a vigorous bull market, prices often retrace up to 33% of the original move. It is not uncommon for prices to retrace up to 50%. Retracements of more than 66% almost always signify an end to the bull market. retracements are short-term periods of a movement against a trend, followed by a return to the previous trend.

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