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Fibonacci Number and Ratio Analysis

retracement range is identified, which cannot occur until a new higher peak or

lower trough is formed. In Figure 10.56, the largest range AD is exceeded, thereby

invalidating all previously drawn Fibonacci retracement levels.

Note that invalidation also applies to price ranges within the largest range.

Exceeding the largest range within the area of observation will be invalidated at

all Fibonacci retracement levels within it, but exceeding smaller ranges within it

will only invalidate the retracement levels of those smaller ranges that have been

exceeded.

Figure 10.57 depicts several examples of invalidation within two‐range for-

mations. Once price violates a prior peak or trough, the Fibonacci levels associ-

ated with that preceding range are invalidated. The dotted lines in Figure 10.57

represent the threshold of invalidation.

Refer to Figure 10.58. Let us assume that we are interested in searching for

potentially significant Fibonacci clusters between point A and point F, that is, the

Figure  10.56 Fibonacci Retracements Invalidated once the Largest Retracement

Range Is Exceeded.

Figure 10.57 Invalidation within Two‐Range Formations.