The  Fib_Time-Price-Gann2  application is an extremely important application for those looking for coincidence of Fib time and/or price projections from several different "legs" of market swings.

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FIBONACCI STUDIES

Overview
Leonardo Fibonacci was a mathematician who was born in Italy around the year 1170. It is believed that Mr. Fibonacci discovered the relationship of what are now referred to as Fibonacci numbers while studying the Great Pyramid of Gizeh in Egypt.

Fibonacci numbers are a sequence of numbers in which each successive number is the sum of the two previous numbers:

1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 610, etc.

These numbers possess an intriguing number of interrelationships, such as the fact that any given number is approximately 1.618 times the preceding number and any given number is approximately 0.618 times the following number. The booklet Understanding Fibonacci Numbers by Edward Dobson contains a good discussion of these interrelationships.

Note: We must also consider the relationships of "normal"
fractions (e.g. 1/2, 1/4, 1+1/2......) as part of
the important ratios in market logic.

There are many ways in which to use such relationships but we
will limit ourselves to two:

1. retracements, and
2. time zones.

The interpretation of these studies involves anticipating changes in trends as prices near the lines created by the Fibonacci studies.


Retracements

The Equis site notes:
Fibonacci Retracements are displayed by first drawing a trendline between two extreme points, for example, a trough and opposing peak. A series of nine horizontal lines are drawn intersecting the trendline at the Fibonacci levels of 0.0%, 23.6%, 38.2%, 50%, 61.8%, 100%, 161.8%, 261.8%, and 423.6%. (Some of the lines will probably not be visable because they will be off the scale.)

After a significant price move (either up or down), prices will often retrace a significant portion (if not all) of the original move. As prices retrace, support and resistance levels often occur at or near the Fibonacci Retracement levels.

Our application considers more ratios than those noted in the Equis documentation.


Time Zones

The Equis site notes:
Fibonacci Time Zones are a series of vertical lines. They are spaced at the Fibonacci intervals of 1, 2, 3, 5, 8, 13, 21, 34, etc. The interpretation of Fibonacci Time Zones involves looking for significant changes in price near the vertical lines.

In our application we use a much more sophisticated approach to Fibonacci time lines in that we have the computer determine the beginning and ending points of price movement and then, taking the time period that is represented in this movement, we calculate (using the "normal" Fibonacci ratios) the next suite of time points.


The following is a sequence of images which are derived from the Fib_Time-Price-GannT Application.  These images show a considerable insight into the Fibonacci approach.

The following chart is the most commonly used method of display for this application.

The chart shows the most likely time and price points at which to expect reversals of a trend that is projected along the red/blue/red lines which make up a channel.  In this case the turn is FORCED and may not actually occur.

Here we add a few more lines to the price projections.  The added lines are not necessarily recognized by the "purist" in the Fibonacci game but seem to have some real wieght in the real market game.

Now we are looking at TIME lines only.  Not only are we looking at current time lines but time lines created by prior swings that are projected forward in time up to 6 times the length of the swing that is being projected.  Look for clusters ! ! !   Also look for voids as these zones may indicate danger.

If we can look only at time lines then we should be able to look only at PRICE lines from the current and many past legs of swings.  This is accomplished in the following chart.

The method even works on weekly data as can be seen below.

And MONTHLY data should be examined for the longterm prospect of any market.

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Fib_Time-Price-GannT

Thanks for looking,
Clyde Lee, Chairman/CEO
SYTECH Corporation

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