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How to Project Fibonacci Time Cycles

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There are a few software packages that have built in functions for avid Fibonacci users. The Fibonacci Trader and Miner’s Dynamic Trader are two packages that I have seen demonstrated. These packages assist the user in analyzing and projecting price and time targets using Fibonacci retracement or extension ratios, and time cycles. The user is able to break the analysis down to almost any intraday time period.

 

This article is to help traders learn how to project Fibonacci time cycles using an Excel spreadsheet or a Fibonacci time extension feature. The main difference between the features is that an Excel spreadsheet is based upon calendar days not trading days.

 

The following are some fundamentals that you need to understand. These fundamentals can be applied to any time frame, i.e. minute, daily, weekly or monthly chart.

 

•Swing highs and lows may be easiest to determine using a bar chart.

•Select major swing points. Major swing points tend to have more significance in the bigger picture.

•Dates that are further apart between swing points have more meaning.

•A confluence of projected dates is more reliable than a standalone date.

•Dates one or two periods either side of the projected dates may be the actual date of a reversal.

•Price must be moving in the direction of the current trend and be close to a high at the time of the projected date.

 

 

The attached chart is a SPX daily bar chart labeled with some swing dates. The gray ellipses represent major points. Note that since July 18, 2006 swing low, it is difficult to find significant swing points. 8/3/05, 10/13/05, 5/8/06, 6/14/06 and 7/18/06 are highlighted points. Additionally the chart shows dashed lines which represent the Fibonacci time extension between the swing highs and swing lows. The extension ratios are discretionary. This function was set up with the 100%, 127.2%, 161.8%, 178.6% and 272.2% ratios. The result shows two dates with confluence at 100% ratio of February 9 and February 13, 2007.

 

The time extension function was applied as follows:

 

Step 1: Selected two swing highs. In this example 8/3/05 and 5/8/06 – 100% result is Feb 9, 2006.

 

Step 2: Selected two swing lows that overlap the swing highs. In this example, 10/13/05 and 6/14/06. Yes 7/18/06 could have been selected, but I chose the lower low swing point. The 100% ratio result is Feb 13, 2006.

 

Step 3: Selected a swing high and low from steps 1 and 2. You could use either pair 10/13/05 and 5/8/06 or 8/3/05 and 6/14/06. In this example the resulting date(s) were not confluent with the ones in Step 1 and 2.

 

What if your software does not have the time extension feature? I set up an Excel spreadsheet that projects dates using a string of Fibonacci ratios. This method is based upon Excel’s date function. Therefore the number of days are calendar days. Note the bold dates are confluent with the projected trading dates from above. The attached Fibonacci Spreadsheet doc shows the calculations for various ratios using the above dates.

 

Another way to look for confluence is to calculate the number of trading or calendar days since a swing low or high to the projected dates. Feb 13, 2006 will be 144 (Fibonacci number) trading days and 210 calendar days since the July 18, 2006 swing low. 210 calendar days is a Gann cycle number. I do not use Gann analysis nor proclaim to be a novice in it. I am only aware of some of his analysis. Attached is a Fib Gann document that you can use for future reference.

5aa70dc43e490_ChartA1.thumb.jpg.61c96a175959a3dacc8e5108ca43f94c.jpg

Fibonacci Spreadsheet.doc

Fib Gann Ref.doc

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