The Market Mood Pullback🩸Fibonacci Retracement

Chronicle Trade Group, LLC
Aug 4, 2023
1 min read

Updated: Aug 5, 2023

A pullback is a market drop of 5-10% and is very short term. It is a dip from a recent high during an ongoing bull market while upward momentum is still intact, and is a normal adjustment to a market cycle. The drops typically do not change the market sentiment.

Fibonacci Retracement helps to identify support and resistance levels in a market pullback. The tool plots percentage retracement lines based upon the mathematical relationship within the Fibonacci sequence. These retracement levels provide support and resistance levels that can be used to target price objectives.

Fibonacci Retracements are displayed by first drawing a trend line between two extreme points. A series of six horizontal lines are drawn intersecting the trend line at the Fibonacci levels of 0.0%, 23.6%, 38.2%, 50%, 61.8%, and 100%.

How this indicator works

The percentage retracements identify possible support or resistance areas, 23.6%, 38.2%, 50%, 61.8%, 100%. Applying these percentages to the difference between the high and low price for the period selected creates a set of price objectives.
Depending on the direction of the market, up or down, prices will often retrace a significant portion of the previous trend before resuming the move in the original direction.
These countertrend moves tend to fall into certain parameters, which are often the Fibonacci Retracement levels.