The Fibonacci retracement method of technical analysis determines levels of support and resistance and is named after the Fibonacci sequence. This method operates on the principle that markets will often retrace to predetermined levels before continuing in their original direction. It consists of seven levels, including 0%, 23.6%, 38.2%, 50%, 61.8%, 78.6%, and 100%, with extensions of these levels in both positive and negative directions. These Fibonacci levels, commonly called Fib levels, are useful to traders for identifying entry points, and stop levels, setting targets, and taking profits. The following graphic illustrates how these levels frequently correspond to price action.
