They take place in an upward or downward trend after an impulsive
Observe chart (below)
IBM stock, monthly chart
A chart is showing a bullish 61.8% Fibonacci retracement at a green
Chart 2: Microsoft Corp stock, weekly chart
A chart that is exhibiting a bearish 50% Fibonacci retracement
at a red horizontal line. Notice also that the price has displayed a
lower high. It has also fallen below the bullish trend line,
and was retesting it on the edge. Nice one.
Bullish retracements are accentuated in a ascending channel, yet bearish ones
emerge in a declining channel. The most popular Fibonacci retracements are
38.2%, 50%, 61.8% and 78.6%. The minor is the retracement, the longer
is the extension.
For example 38.2% Fibonacci retracement is extra bullish
(extra bearish in a down trend) than 61.8% trade setup.
Frequently, Fibonacci retracements are superficial pullbacks or rallies. They
are contra-trend mini cycles with little volume stock trading.
Look At charts
Nike Inc stock, 4-Hour chart
This chart is illustrating a 38.2% Fibonacci retracement with a declining trading volume.
The declining volume indicates a lack of bearish intention to sell after the preceding
bullish movement under a huge volume. A bullish trade setup is in place. One will now
apply the trading drill and triangle like a pro.
volume stocks trading except during the corrective stage of an
Elliott wave cycle.
Classes of retracements
Dealers generally assume that a Fibonacci retracement should constantly be
simplistic or a neat pullback or rally. Still, at times they are complex. There are
Zigzag or double and triple zigzags, contracting or expanding triangles plus
familiar with the indicated untidy settings.
See chart (below)
British Pound/Australian Dollar, weekly chart
This chart is illustrating a complex 38.2% Fibonacci retracement in the form of
a green zigzag Elliott wave pattern.
At Any Time a Fibonacci retracement obliterate the preceding impulsive
move; it is termed total or 100% retracement. That retracement often
times happens due to financials as the price returns to a cycle point.
See the graph
Caterpillar Inc (CAT) stock, monthly chart
A chart that is highlighting a total Fibonacci retracement at 100% or
cycle point. A total Fibonacci retracement often cancels prior trend
or impulsive price action.
The earliest thing a stock market partaker should do after a total retracement is to
perform the Google finance acid test or a thorough fundamental analysis. This permits
magical support or resistance regions, they are not. One should wholly accept
them together with the trading drill and triangle.
38.2% is nearly 40%
68.2% is roughly equal to 70%
78.6% is around 80%
One may state 38% Fibonacci retracement is about
40% profit-taking and 78.6% is relatively
80% reduction to the most current highest
price. Numerous bullish stocks or commodities with viable financials at 78.2%
price cut are oversold. On the other hand, the indicated which surge to 78.6%
Fibonacci retracement after an initial bearish price move are overbought if
fundamentals are weak or deteriorating. Nearly All hedge funds and additional
big investment firms favour those oversold and overbought price levels.
Validation of 38% Fibonacci retracement level
From a technical analysis viewpoint, there are three confirmations.
During an uptrend,
1/ price should be in a rising channel,
2/ price should breakout of a resistance,
3/ price must confirm the resistance as a support.
One will also align the technical analysis with the financials.
View this video
Title: How To Master The 38 2 Fibonacci retracement
Description: Learn and master how to trade the 38.2% Fibonacci
retracement with a greater success. Follow the correct steps to
identify the best 38.2% Fib level trade setup.
During a downtrend
1/ price ought to be in a declining channel,
2/ price must decline below a support level,
3/ the support must change into a resistance.
Band between 50% and 61.8% Fibonacci
Traders call it sweet spot zone because large trading pursuits often take
place in it. This swell in trading further signals the start of a new trend
if both fundamentals and market conditions are recovering or worsening conjointly.
After the motive wave, asset many times retraces into the sweet spot band.
Look At chart
United Technology Corp stock, monthly chart
After the bullish trend (1993-2008), a healthy profit taking (2008-2009)
landed the price into the sweet spot Fibonacci retracement zone. Smart investors
responded to the invitation to buy, and the stock began a new trend. Note that the stock
will continue to fall if the fundamentals and market environment were deteriorating.
One ought to combine the technical analysis with a thorough due diligence.
50% and 61.8 retracements
Dynamic bullish stocks often gain support at 50% Fibonacci retracement since
clever bearish traders or investors will stay away.
These financial instruments hold sound fundamentals and regularly return
succulent dividends to devoted shareholders. Innovative firms that increase
their market share are tough to sell. If the stock drops into the 50% Fibonacci
retracement region, a frenzy accumulation will begin as new comers follow
the long-term investors.
The 50% Fibonacci retracement is also a Psychological Price Level or PPL. It splits the
market into two territories. Bullish above and bearish below. For this reason,
a dynamic bearish stock will find it difficult to extend above this level as it
has inadequate or degrading financials.
Title: How To Combine Two Fibonacci Retracement
Description: A trading method or strategy that combines two Fibonacci
retracement levels to pinpoint accurate buy or sell trading
Technical traders who gain mastery in the zigzag Elliott wave pattern are also
veteran of the PPL trading. Note that one can not achieve profitable trades if
one is overlooking the fundamentals.
Although, bullish traders have the upper hand at any time the asset price is
above the PPL, bearish traders will not delay to defy the classic technical
traders if the financials do not align. The inverse is also correct below it.
This event is natural in the Commodity markets. In fact, the 50% Fibonacci
retracement trading is widespread in this market.
61.8% Fibonacci retracement
Be aware that this Fibonacci retracement is below the 50% in an uptrend, as
a result in the bearish territory. In a bearish trend, it is in the bullish band.
Eager Elliott wave practitioners often place limit orders at 61.8% zone after the
first Elliott wave to grab the third wave. In this occurrence, they will set their stop loss
few pips below the initial wave low.
The tactic derives from the wave principle that affirmed the second wave
should not eliminate the 1st wave. Technical traders should apply market geometry
or channel projections to pinpoint reliable 61.8% hot spot trading zones.
Procter & Gamble Co stock, monthly chart
The chart is highlighting the application of the market geometry to pinpoint a viable
61.85 Fibonacci retracement trade setup on the edge. Notice the initial blue channel.
The second projected channel is in red colour. The red horizontal line is at 61.8%.
See also the surge in trading volume at this hot spot trading zone. A beautiful trade
setup for TSTW SYS 008 traders is in place.
As always if one recognizes a high probability trade, one will invariably apply the
trading drill and triangle.
78.6 Fibonacci retracement
Fibonacci retracement trading zone. Theoretically, it is an oversold area after a bullish cycle
The zone of 78.6% is overbought after bearish market cycles if the fundamentals have
not changed. If an asset is in the 78.6 zone but has passed Google finance
acid test (strong financials), most smart investors will purchase it. On the other
hand, intelligent market participants will exchange assets that have failed the
acid test if they reach 78.6% Fibonacci retracement zone.
See the chart below
McDonalds Corp stock, monthly chart
A bullish trend started in 1983, but became unsustainable in 2000
because of the bearish environment (due to the 2000 tech-bubble).
An overdue correction began with vengence, and the asset dropped to
the holy 78% Fibonacci retracement level. Eager and smart investors
recognized that McDonalds stock was fundamentally oversold. The frenzy
accumulation that began in 2003 pushed the asset price from the pink
line to its highest price today at $100. Will it cross the $100 level or is
another Fibonacci retracement (market correction) waiting to begin?
The future will tell. One thing is certain, after a prolonged trend
there will be a healthy correction. It may be delayed, but it is vital for
an orderly financial market.
Other fib retracements
88.2% Fibonacci retracement
patterns are familiar with the indicated level. Traders also described
the present patterns as harmonic patterns on account of the harmonious
correlation between fibonacci retracements that create them. Those are also
It is essential that financial market traders learn to master the Fibonacci
patterns to improve their decisions. Indeed, if one wants to become a
Fibonacci retracement trader, one will learn these patterns because they
generate reliable trade setups.
In all cases, one will use each Fibonacci retracement in conjunction with
the three market patterns.
Check out more about Fibonacci retracement HERE