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Fibonacci Retracements are ratios used to identify potential reversal levels.
These ratios are found in the Fibonacci sequence.
The most popular Fibonacci Retracements ratios are 61.8% and 38.2% and 23.6%.
calculation of fibonacci retracements in fibonacci series
0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233
The 61.8% ratio is found by dividing one number in the series by the number that follows it. For example: 8/13 = 0.6153, and 55/89 = 0.6179.
The 38.2% ratio is found by dividing one number in the series by the number that is found two places to the right. For example: 55/144 = 0.3819.
The 23.6% ratio is found by dividing one number in the series by the number that is three places to the right. For example: 8/34 = 0.2352.
using these ratios
for bullish trend
when a horizontal lines is drawn with the bottom & top it is considered to be 0% & 100% respectively.
the possible resistance zones are 23.6% 38.2% 61.8%
if the price goes above 23.6% then there is support the resistance zones can be 38.2% & 61.8% likewise resistance zone is considered
for bearish trend
when a horizontal lines is drawn with the bottom & top it is considered to be 100% & 0% respectively.
the possible support zones are 61.8% 38.2% 23.6%
if the price goes below 61.8% then there is resistance the support zones are 38.2% & 23.6% likewise support zone is considered
Fibonacci Series 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144,………….
1.618 is the golden mean
the logic is
if a number is divided by the previous number the value is approximately 1.618 (ex: 21/13=1.6153)
rsi – relative strength index
it works in the non trending time
it indicates the overbought & oversold region
when the rsi indicator is applied lower scale appears with 70 & 30 mark line
if the rsi scale goes above 7o mark i.e. rsi>70 it indicates the strength and if rsi scale comes back to 70 mark it indicates the overbought , temporary weakness is expected
is the rsi scale goes below 30 mark i.e. rsi<30 it indicates the weakness an if rsi comes back to 30 mark it indicates the oversold , temporary strength is expected
moving average is the technical indicator
moving average works well during trending
moving average looks smoother by indicating a coloured line in the chart and it is effective for short term 21 days i.e. one month
if the price goes above the indicator then the trend is bullish
if the price goes below the indicator then the trend is bearish
technical indicators are the algorithmic indicators
it can be used as the supporting tool to confirm the trend identified using dow theory,price patterns & candlestick analysis
it is a readymade analysis
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