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Fibonacci Retracement – Waiting For The Right Moment (Part II)
Education | 08 June 2012
By:

By Chart Nexus

We hope that you have gotten familiar with the identification of support and resistance levels using Fibonacci Retracement after reading part one of our two-part article. Coming into the second half, we will see how Fibonacci Retracement levels can be used in conjunction with other indicators to help in analysing the stock chart. This is known as the confluence of signals. The combination of other indicators further enhances and compliments the usage of Fibonacci Retracement levels, thus, resulting in a higher probability of a successful trade. In this article, one of the most popular indicators used by many traders, the 100-day moving average is used to analyse the stock chart of Goodpack which is shown in Figure 1.

Figure 1: Using moving average with Fibonacci Retracement level

Figure 1 clearly shows that the price level of Goodpack was trading near the 61.8 percent Fibonacci Retracement level on 3 May 2012. While the 100-day moving average was supporting the price movement, Fibonacci Retracement was providing support at the 61.8 percent level which was at about the same price level as the moving average line. Hence, the price is said to be very well supported because we have the confluence of two types of analysis, namely the moving average and Fibonacci levels.

As a whole, this series have highlighted the importance of understanding the stock market behaviour in order to enhance one’s timing of the stock market. A powerful tool such as Fibonacci Retracement is widely used to identify possible support and resistance to price movement. This helps experienced traders to buy low and sell high. In addition, the usage of the Fibonacci Retracement line together with the concept of support and resistance levels and the confluence with the 100-day moving average can help one to forecast possible price movements and increases one’s confidence to take the trade.

Author Profile
ChartNexus is a regional company providing FREE charting software for the investment community.  The company also organizes investment seminars and training program on a regular basis, promoting the use of technical analysis.  For more information, please visit www.chartnexus.com or email sgevents@chartnexus.com


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