Applying Fibonacci Series in Stock Market..

Applying Fibonacci Series in Stock Market

Following article is published by Waves Strategy Advisors. For more information visit www.wavesstrategy.com

Fibonacci numbers are commonly used in Technical Analysis with or without knowledge of Eliott Wave analysis to determine potential support, resistance, and price objectives. The Fibonacci series is a numerical sequence comprised of adding the previous numbers together, i.e. (1,2,3,5,8,13,21,34,55,89,144,233 etc..). 

An interesting property of these numbers is that as the series proceeds, any given number is 1.618 times the preceding number and 0.618% of the next number.

Following properties are usually used for Fibonacci retracements:

·         38.2% retracement is common in wave 4

·         61.8% retracements is common in wave 2

We find these numbers everywhere in nature as well as stock market.If we look closely, we can see patterns in almost everything around us. Some of the examples are shown in the below picture

The price movements of financial markets are also patterned, and Elliott wave analysis gives you the tools to interpret those patterns. Once you understand the Fibonacci sequence, it's easy to apply it to the markets you trade.

The below excerpt is from our daily publication of Equity report- “The Financial Waves Short term update” which gives a clear picture of how well Fibonacci is applied along with Elliott waves.

BHEL 120 mins chart:

Waves Analysis:

As shown above in 120 mins chart of BHEL, from October to December 2012 prices have been moving in a range of 220-250 levels.  61.8% retracement of the previous up move from 195 to 275 levels comes near 220 levels. Three times prices have approached this level and bounced back on upside. This is the strength of Fibonacci retracement level of 61.8% which has worked precisely in this stock.

To know what we expect from here and how to forecast using Elliott wave and Fibonacci projections subscribe to daily research reports in Equity, Commodity & Currency or register for Distance learning training module for Elliott wave by writing to us at helpdesk@wavesstrategy.com or you can call us on +91 9920422202.