As of 09/06/2024
Indus: 40,345 410.34 1.0%
Trans: 15,427 190.44 1.2%
Utils: 1,029 7.87 0.8%
Nasdaq: 16,691 436.83 2.6%
S&P 500: 5,408 94.99 1.7%

YTD
+7.0%
3.0%
+16.7%
+11.2%
+13.4%

42,000 or 39,500 by 09/15/2024
16,200 or 15,300 by 09/15/2024
1,100 or 1,000 by 09/15/2024
18,400 or 16,650 by 09/15/2024
5,750 or 5,375 by 09/15/2024

As of 09/06/2024
Indus: 40,345 410.34 1.0%
Trans: 15,427 190.44 1.2%
Utils: 1,029 7.87 0.8%
Nasdaq: 16,691 436.83 2.6%
S&P 500: 5,408 94.99 1.7%

YTD
+7.0%
3.0%
+16.7%
+11.2%
+13.4%
 
42,000 or 39,500 by 09/15/2024
16,200 or 15,300 by 09/15/2024
1,100 or 1,000 by 09/15/2024
18,400 or 16,650 by 09/15/2024
5,750 or 5,375 by 09/15/2024
 
My book, Trading Basics, discusses Fibonacci extensions beginning on page 84 in the section titled, "4. Myth: Fibonacci Extensions Work!".
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I show a picture of DuPont (DD) on the daily scale to illustrate what a Fibonacci extension is.
An extension is just as it sounds, a lengthening of the AB move. If the AB move represents a 100% gain, then point D would be some multiple of that (even if the multiple is a fraction). Many will claim that the multiple will be a Fibonacci number, such as 38%, 50%, 62% or higher, such as 138%, 162% and so on. The retrace to C does not affect the extension computation. The extension measures from B to D.
In this example, the move from A to B is 3 points. The move from B to D is 6 points (all values are approximate for simplicity). Thus, the BD move is 200% of the AB move. It's a 200% extension.
How often is the extension a Fibonacci number? Another way of asking that is, can we say that if price approaches a Fibonacci multiple that it will be more likely to hit overhead resistance than any other multiple? The short answer is "no."
I programmed my computer to find the ABCD move in every stock I follow and some that I used to follow, or almost 1,500 securities. I only included data from stocks priced over $5 per share from the start of the bear market in March 2000 to April 27, 2011.
Using 21,626 samples from a bull market, I did a frequency distribution of the BD gain as a percentage of the AB move in 5% increments up to 180%. If the Fibonacci extension believers are correct, then I should see spikes at 35% to 40%, around 50%, 60% to 65%, and so on.
There were no spikes. Only at 100% do we see a marginal increase in the number of hits from 264 at 95% to 277 at 100% and 223 at 105%. Based on this test, using a Fibonacci extension will not see price hit overhead resistance there. I also extended the frequency distribution up to 350%, but the percentage trend didn't change. There is no overhead resistance prevalent at any Fibonacci extension number.
Fibonacci extensions work no better at predicting where price is going to turn than any other percentage.
 Thomas Bulkowski
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