## Sunday, May 3, 2009

### Fibonacci retracement

Fibonacci retracement

Fibonacci is a set of number sequence generated by adding up two numbers occuring in a number series for eg number series = 1 2 3 4 5
fibo series 1 1 3 5 8 13 etc

similarly stock also show a similar approach when point A goes to point B there is always a pressure of correction or retracement, how much will these retracement go there are three critical points 38.2%or original 50% and 61.x % as shown in the figure, so first resistance occurs at 38% and if it passes that 50% is next catch and thirdly 61.8 levels.
Next obvious question arises is how are we getting the percentages.... 3/5 ,5/8, 8/13 all generate a number around 0.618x
.382 = .618 squared

.500 = 1 ÷ 2, the second and third numbers in the series

.786 = square root of .618

1.000 = 1.618 x .618

1.272 = square root of 1.618

2.618 = 1.618 squared

I am posting a video which describes in detail the workings of Fibo nacci retracement

Also go to Afraidtotrade.com where corey rosenbloom has posted some cool retracement scenarios... India's NIFTY Find more videos like this on ChartWatchers