the hAnDbook oF teChnICAl AnAlysIs10.7 Fibonacci (Φ‐Based) Percentage Projection Levels from a Significant Peak or Trough
Fibonacci projections are especially useful for forecasting potential support and
resistance when price is making new highs or lows, where no historical or prior
support or resistance levels are available for reference. The Fibonacci trader or
analyst attempts to find potential support and resistance levels beyond the original
retracement range. Fibonacci projections are most reliable when they are part of
a tight supportive or resistive confluence.
Besides using Fibonacci projections, potential support and resistance levels
may also be determined, especially when price is making new highs or lows, via
any of the following technical tools:■ (^) Floor Trader’s Pivot Point Analysis
■ (^) Channel Projections—Internal and External
■ (^) Trendline and Channel Analysis
■ (^) Gann Price Projections
■ (^) Psychological Numbers
Potential Fibonacci resistance levels may be forecasted by projecting vari-
ous Fibonacci ratios of a certain significant price range, from a higher significant
trough. Assuming that the distance between the trough at point A and the peak at
point B is AB, we may choose any Fibonacci percentage with which to project AB
from a higher significant trough (point C).
The main Fibonacci percentages associated with projections are:
■ (^) 61.8 percent
■ (^) 161.8 percent
■ (^) 261.8 percent
■ (^) 361.8 percent
■ (^) 423.6 percent
■ (^) 461.8 percent
By convention, the following percentages are also used along with Fibonacci
projections:
■ (^) 100 percent
■ (^) 200 percent
■ (^) 300 percent
■ (^) 400 percent
Please refer to Figure 10.31.
Similarly, for downside projections, we may choose any Fibonacci per-
centage with which to project AB from a lower significant peak at point C,
with the objective of locating potential support levels in the market. Refer to
Figure 10.32.