the hAnDbook oF teChnICAl AnAlysIs10.6.1 Calculating potential support via Fibonacci
Downside expansion Levels
When calculating Fibonacci downside expansion levels, we may use either the
significant peak (point A) or the significant trough (point B) as the base for
the expansion. By convention, we should use the peak at point A for all down-
side expansion calculations, even though both approaches will give the same
results.
Assume that the significant peak and trough of an observed price range are
point A and point B, respectively. Assume that the peak at point A is at the price
level of $89 and that the trough at point B is at $76. Refer to Figure 10.27 as a
visualization guide.
The formula for calculating downside expansion levels below a given price range is:
Peak (Price Range Expansion Ratio)− ×In our example, the observed the price range AB is:Price Range Peak Trough
A B
89 76
13=−
=−
=−
=
$ $
$
(Note: We always subtract the trough from the peak, regardless of whether it
is for a downside or upside expansion calculation, as the price range must always
be a positive value.)
The 127.2 percent downside expansion level is:=− ×
=− ×
=Peak Price Range Expansion Ratio
A Price Range 1 272
89( )
(. )
$ −−×
=
($. )
$.
13 1 272
72 46
The 200 percent downside expansion level is:=− ×
=− ×
=−Peak Price Range Expansion Ratio
A Price Range 2 0
89( )
(. )
$ ($$. )
$
13 2 0
63
×
=
The 423.6 percent downside expansion level is:=− ×
=− ×
=Peak Price Range Expansion Ratio
A Price Range 4 236
89