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Fibonacci retracement helps us to identify potential reversal of trend.
Create a chart with trendline at 100%,61.8%,50%,38.2%,23.6%,0%
start with high at 100% trendline. If the stock touches 61.8% ,it is the time to look for reversal.Once it reverses,it has resistance at 100%.
If it does not reverse,look for support at 38.2%.
Thus the support and resistance zone are identified.
Fibonacci retracement helps us to identify potential reversal of trend.
Create a chart with trendline at 100%,61.8%,50%,38.2%,23.6%,0%
start with high at 100% trendline. If the stock touches 61.8% ,it is the time to look for reversal.Once it reverses,it has resistance at 100%.
If it does not reverse,look for support at 38.2%.
Thus the support and resistance zone are identified.
Fibonacci sequence can be used to forecast the likely correction of a trend in the stock market.The recent trough and the peak is identified that marks the 100%.For eg,let us consider a bullish trend,after the 100% zone is reached the stock is expected to retrace back to the fibonacci retracements(61.8%,38.2%…).If at 61.8% it touches and then reverses,then 61.8% level is the support and 100% level is the resistance,else if it continues to drop down to 38.2% level then it becomes the support and the 61.8% becomes the resistance and the vice versa holds true for a bearish pattern too.Fibonacci retracements should be used as a confirmation tool in addition to other analysis tools.
Fibonacci retracement uses horizontal lines drawn at ratios in percentage(38.2% and 61.8%) to identify support and resistance.
Fibonacci retracements use horizontal lines to indicate areas of support and resistance.They are calculated by first locating the high and low of the chart.Then five lines are drawn:the first at 100% ( high on the chart) , the second at 61.8% , the third at 50% , the fourth at 38.2% and the last one at 0%(low of the chart). After a significant price movement up or down , the new support and resistance levels are often at or near these lines.
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