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Fibonacci Retracement FIBs

Why and how to use it.

Basic,simple & clean;
Fibonacci Retracement is use to determine support after a run or resistance after a dive.

The books say;
Fibonacci Frustrations
The most common charting programs include Fib retracements, arcs, fans and time-frame tools. But by the time the trader has applied these tools to multiple pivot points in multiple time frames, the chart is barely comprehensible, let alone useful for making trading decisions. As a result, most traders use these tools in only a single time frame with only one or two pivot points. While the resulting chart is easy to read, the lines are often not very significant and therefore not reliable because too much data is being ignored. (For more on using pivot points, read Using Pivot Points for Predictions).

The reason for this dilemma in using Fibonacci tools is simple. Studies and long-term observations have shown that Fibonacci retracement levels - calculated using numerous pivot point swings in multiple time frames - work best in the zones in which they converge. The more often these lines converge at or near a single price level, the more significant and therefore reliable they become in determining potential pause or reversal points. But calculating and plotting these confluence levels by hand, especially intraday, is both time consuming and complex, so few are able to do it accurately or quickly enough for trading purposes.


IMO
Each move needs to be evaluated individually. Bottom to top in a run and top to bottom in a dive. The 38% level is the weakest level and 61% level the strongest, be it support or resistance.

Chart of FIBs for AUY; each run and each dive should be evaluated individually. Picking and including multiple moves is just tricking yourself to compliment what you want to see, or you wouldn't have picked those points out of all the points available.



Because of this clutter and confusion in the over all chart, one should only choose the largest run and dive to evaluate support resistance. Which just so happens, often gives a good representation of over all true value.

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Here's a chart of AKS which I did, while evaluating my present play. As you can see the green is drawn from bottom to top and shows the weakest support (38%) as the 1st support level. As price crosses each level strength is added until when 61% is broken, when the odds for a new pop becomes less likely.

Vise versa the blue dive eval is drawn from top to bottom and shows weakest resistance to a pop at the (38%) level.

This evaluation helps me feel more comfort in my decision to trade the chart pattern and indicators I used for entry. Because a move to true value from either extreme is logical and supports a new run to the double bottom chart target of 16.25 I used, with around $16, being thought of as true value.