scorpiogirl,try it on centro. High $8 Low $6 use the ratio and...

scorpiogirl,
try it on centro. High $8 Low $6 use the ratio and buy at 100% retracement. You would have lost your house!

The maths is correct. It is a typical deceptive technique. Use something that is obviously correct, in this case the maths for retracement is correct, to adjust the brain to think the final analysis is correct.

Try this:

0.1 0.869 0.461
0.2 0.818 0.512
0.5 0.665 0.665
0.6 0.614 0.716
0.8 0.512 0.818
1 0.410 0.920

The maths is right, does not prove a thing. Will the market support at the previous low of 4.1. There is a usual bounce of previous low. But, sentiment can break that previous low and a new low usually a major break if the fundamentals cause that break e.g. CMR.
Many have used this technique at $1.50 for CMR and have lost heavily. CMR pick it up at 31c now.