the hAnDbook oF teChnICAl AnAlysIs
10.19 Fibonacci Arcs
Fibonacci arcs are yet another way to apply Fibonacci‐based ratios to price action.
There are two types of arcs, that is, Fibonacci resistive and supportive arcs. Fibo-
nacci arcs are the circular counterparts of conventional Fibonacci retracements. A
Fibonacci supportive arc is drawn from a significantly clear and obvious trough to
the next significant higher peak, whereas a Fibonacci resistive arc is drawn from
a significantly clear and obvious peak to the next significant lower trough. The
arcs represent barriers to price action, as is the function of all overlay indicators.
In Figure 10.73, we observe that the 61.8 percent Fibonacci resistive arc provided
resistance to price at point 1. This is a particularly high‐probability entry point
for traders looking to short this stock, as there is a resistive or bearish confluence
comprised of a prior resistance level and an upper regression channel line. The
Figure 10.71 Less Conventional Fibonacci Downside Channel Expansions.
Figure 10.72 Fibonacci Downside Channel Expansion Lines on the Gold Daily Chart.
Source: MetaTrader 4
