Fibonacci Number and Ratio Analysis
In Figure 10.53, we see these adjacent and overlapping two‐range formations
on the VIX daily chart.
Figure 10.54 illustrates a typical two‐leg retracement range. The area of ob-
servation spans from point A to the current price. Applying the general rule for
drawing retracements, we start from the leftmost range AB, which fails to fulfill
the general rule of engulfing all subsequent ranges within the area of observa-
tion. The next range under consideration would be that of BC, which also fails
to fulfill the general rule. Hence, no Fibonacci retracements are drawn for these
last two ranges. Conversely, the range CD satisfies the general rule of engulfing
all subsequent ranges, as long as price remains within the range CD. Similarly, the
range AD also satisfies the general rule of engulfing all subsequent ranges, as long
as price remains within the range AD. Therefore, Fibonacci retracements are only
drawn for ranges AD and CD, after which the practitioner may begin looking for
significant Fibonacci clusters within the two‐leg formation.Figure 10.52 Various Adjacent and Overlapping Two‐Range Formations.Figure 10.53 Various Adjacent and Overlapping Two‐Range Formations on the
Daily VIX (Volatility Index) Chart.
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