Fibonacci Number and Ratio Analysis
The 50 percent downside retracement level is:=− ×
=− ×
=Peak Price Range Retracement Ratio
B Price Range 0 5
99( )
(. )
$ −−×
=
($. )
$
40 0 5
79
The 61.8 percent downside retracement level is:=− ×
=− ×
=
Peak Price Range Retracement Ratio
B Price Range 0 618( )
(. )
$999 40 0 618
74 28
−×
=
($. )
$.
10.5 Fibonacci (Φ‐Based) Percentage Extension Levels beyond an Observed Price Range
As previously mentioned, Fibonacci extensions are retracements that correct more
than 100 percent.
Popular Fibonacci price percentage extension levels include:■ (^) 127.2 percent
■ (^) 161.8 percent
■ (^) 261.8 percent
■ (^) 361.8 percent
■ (^) 423.6 percent
■ (^) 461.8 percent
It is customary to also include multiples of the 100 percent retracement, namely:
■ (^) 200 percent
■ (^) 300 percent
■ (^) 400 percent
Traders and analysts look for potential support at these significant Fibonacci
downside extension levels, and potential resistance at significant Fibonacci upside
extension levels. See Figures 10.23 and 10.24.
Figures 10.25 and 10.26 are examples of downside and upside extensions,
respectively.
In Figure 10.26 we observe that the 161.8 percent extension level of the range
AB coincides with a channel top and an overbought signal on the stochastics. This
resistive confluence of indicators potentially increases the probability that price
reacts or reverses at the forecasted Fibonacci expansion level.