What is Fibonacci values?

Question

I was trying to analyze one stock, where there was a link called Fibonacci value, which shows different prices of stock as bellow:

Trading :: Fibonacci Values Stock Code ANDPRA Exchange NSE 1st Fibonacci Value 343.00 2nd Fibonacci Value 338.89 3rd Fibonacci Value 337.63 4th Fibonacci Value 336.36 5th Fibonacci Value 334.79 6th Fibonacci Value 332.25

Fibonacci Retracements

Fibonacci Retracements are ratios used to identify potential reversal levels. These ratios are found in the Fibonacci sequence. The most popular Fibonacci Retracements are 61.8%, 50% and 38.2%. Ratio of 61.8% is referred as golden ratio and holds highest significance of all.

Application :

After an advance, Fibonacci ratios are applied to price advance (difference between extremes) to define retracement levels and forecast the extent of a correction or pullback. Fibonacci Retracements can also be applied after a decline to forecast the length of a counter trend bounce. These retracements can be combined with other indicators and price patterns to create an overall strategy.

Can anyone make me understand what this Fibonacci values says about this stock?

Answer 1

Usually when a stock is up-trending or down-trending the price does not go up or down in a straight line. In an uptrend the price may go up over a couple of days then it could go down the next day or two, but the general direction would be up over the medium term. The opposite for a downtrend.

So if the stock has been generally going up over the last few weeks, it may take a breather for a week or two before prices continue up again. This breather is called a retracement in the uptrend. The Fibonacci levels are possible amounts by which the price might retract before it continues on its way up again.

By the way 50% is not actually a Fibonacci Retracement level but it is a common retracement level which is usually used in combination with the Fibonacci Retracement levels.

Answer 2

This is how I've understood this concept. Fibonacci nos/levels/ratios/%s is based on concept of sequential increment. You may find lot of info about Fibonacci on net. In stock market this concept is used to predict psychological level. While a trend is form, usually price tend to accumulate/consolidate at these level. How the percentage/ ratio make impact is - check any long trend...Now draw a fibbo retracement from immediate previous high and connect it's low. You will see new levels of intermediate trend. In broader term you will find after reversal a leg (trend) is formed, then body and then head which is smaller; then price reverses. The first leg that forms if it refuses to break 23.6% or 38.2% then the previous trend may continue. 50% is normal; usually this level is indecision phase. Even 61.8% is seen as indecision but it is crucial level as it is breakout level towards 100%. Now if the stock retraces 100% then it is sign a new big trend is forming. Now for day trader 23.6%,38.2% and 50% level are very crucial from trading purpose. This concept is so realistic that every level is considered and respected. Suppose if a candle or bar starts at 23.6% level and crosses 38.2% and directly hits 50%. Then the next bar or candle will revert and first hit 38.2% and then continue with the trend. It means price comes back, forms it area at this level and then continue whichever direction the force directs it. You never trade fibo alone, you need help of oscillators or other tools to confirm it.