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  Fibonacci extensions

  allow stock market traders to distinguish

  unknown support and resistance levels.

  See the FX chart ( below)

  US Dollar/Japanese Yen currency pair, weekly chart

  After the initial 61.8 Fibonacci retracement, the pair rallied up

  to the 161.8% Fibonacci extension level. 

  Fibonacci traders also employ them to establish price target or define latent

  reversal market trading zones.  

  For example, if one purchases a financial security at the 50% Fibonacci level,
  one will place a price target at 150% Fibonacci extensions.  Yet if one orders at

  61.8%, then the target will be set at 127%.  At Times, the price may not knock

  the target due to financials or market sentiment.  The usual bullish or bearish

  fibonacci retracement is the 38.2%.  In this circumstance, one will set　the price

  target at 161.8% Fibonacci extensions.

  Note that financial market traders usually regard these Fibonacci extensions

  territories as overbought or oversold.  

  See the stock chart (below)

  Merck & Co (MRK) stock, monthly chart

  The price failed to gain support beyond the 314% Fibonacci extension region.

  It became overbought as the market would expect it at this level.  Notice that

  an Elliott wave cycle ended in 1994 before a new trend sent the asset price

  to the 314% level.  Indeed, the asset was not overbought just because of the

  Fibonacci extensions, but due to financials plus a skeptical market sentiment

  at this point. 

   Dynamic bullish stocks

   may strike a target area, but continue to climb until it has amply outdone

   its book or just value.  The converse is also true in a downtrend.  

   In addition, convergent signals may emerge in the indicated areas.

   The conventional approach to trading the present signals is to use a top-down

   trading method.

   For example, if a bullish security expanded to a convergent point (price target),

   financial market traders would observe reliable bearish chart patterns on both

   the signal and entry time frames.  One will authenticate these patterns by

   checking the financials on Google finance.

   See video

   Title: How To Trade Fibonacci Extensions Like A Pro

   Description: A thorough explanation of how to trade the financial markets using

   Fibonacci extensions like a professional trader or investor.

 Others extensions

 Apart from 127%, 150%, 161.8%, stock traders also use the following:

 138%, 214%, 238%, 261%, 314% and 361% Fibonacci extensions.

 In this circumstance, one can not dissociate the Elliott wave theory and

 Fibonacci extensions.  It is almost useless to gain mastery in Fibonacci

 extensions if one does not understand the Elliott wave extensions theory.

 Even If, many may object to　this declaration, it becomes more acceptable

 as one begins comprehending the wave principle.

 Value of the wave theory

 In order to trade fibonacci extensions more precisely, one must grasp when　

 and where extensions occur.  With the wave theory, FX or options traders

 know that extensions are standard during the 1st, third and fifth Elliott waves.

 They also discern that the 138% Fibonacci extension is a　component of

 the expanded flat correction formation.  An Elliott wave trader also realizes

 that the genuine fibonacci extensions such as 261%, 314% and 361%

 normally take place during the third Elliott wave.

 See stock chart (below)

 Nike Inc stock, monthly chart

 Notice that the fifth Elliott wave [bracketed with two vertical blue lines]

 extended into the 314% Fibonacci extension.  A smart wave trader would expect it

 if neither the first nor third Elliott wave is extended.  Indeed, the extension

 will not take place if both the financials and market (S&P 500) were bearish. 

 
Fib extensions and patterns

There are several Fibonacci patterns also identified as harmonic patterns

such as crab, bat, butterfly and Gartley patterns.  These structures emphasize

Fibonacci retracements and extensions.  To know if a Fibonacci pattern is in

place, one ought to know the corresponding Fibonacci extensions.

For example, during the formation of Gartley pattern, the price structure CD

ends at 127% or 161% Fibonacci extensions in relation to AB.

In the case of the crab pattern, it is extended to either 2.24% or 3.61%.
Similarly, the bat pattern's CD price structure is prolonged up to 1.61%

and 2.61% Fibonacci extensions band.

To master Fibonacci extensions trading like a pro, check the video below

Title:  Fibonacci training

Description:  A step by step trading method for mastering Fibonacci extensions

                   with a greater success.  Improve Fibonacci trading in one hour.