Fibonacci retracement plots possible support and resistance levels from an ongoing
trend by identifying key Fibonacci ratios within the trend's range. As per Elliot
wave theory, an impulse wave is followed by a corrective wave where investors
either take profit or selling pressure is starting to build up because the price
has become expensive. Fibonacci retracement levels shows possible points of
reversal of these waves. Fibonacci retracement ratios except for the 0.500
(50%) level are as follows.
The 50% retracement level was not
derived from the Fibonacci numbers but traders usually believe based on historic
trends that markets tend to pull back 50% and then reverse to continue whichever
direction it is headed.