## Concept Of Support, Resistance And Fibonacci Retracements

In the previous post, we learned about the **Trend Line: Basic To Advance Prize Action**. If you do not read that article you must be read that article before reading this.

As you know that the trend is of three types-

**uptrend**,**downtrend**and**sideways****trend**.The uptrend goes with

**higher highs**and**lower highs**formation, The downtrend goes with lower highs and higher lows formation And The sideways trend**goes with the same highs and****lows.**## Concept Of Support

The

**concept of support**is different in all trends. In an**uptrend,**the higher lows are the support. In the**downtrend**the lower lows are support. In the**sideways trend,**the lows are support.**There are two types of support**

**1. Minor Support:**This is the support where the prize is only one time taken to support. as higher lows in an uptrend, lower lows in a downtrend, and lows in a sideways trend.

**2. Major Support:**This is the support where the prize is two or more than two times taken to support. as given in the image below...

## Concept Of Resistance

The

**concept of resistance**is opposite to**support**. In an uptrend, the higher highs are the**resistance**. In the downtrend, the lower highs are the resistance. In a sideways trend, the highs are the resistance.**There are two types of resistance**

**1. Minor Resistance:**This is the resistance where the prize is only one time taken resistance. as higher highs in an uptrend, lower highs in a downtrend, and highs in a sideways trend.

**2. Major Resistance:**This is the resistance where the prize is two or more than two times taken resistance. as given in the image below...

## How Support And Resistance Levels Reverse Their Roles

Now, we understood the concept of support and resistance but, think about that situation when the support is broken down and the resistance is broken out on that situation the sign to reverse the trend

now, we understand for example...

### Support Becoming Resistance and Vice Versa: Degree of Penetration

After the break out of resistance in a downtrend and break down of support in the uptrend. it reverses their roles the resistance act as support and the support act as resistance. Now, understand with the image given above

## Fibonacci Retracement

Fibonacci retracement is a very effective tool to identify

*support and resistance*. It is very useful for trader/investors the buy, sell, stop loss, and target. The level of**Fibonacci retracement**is work most of the time. Let's more discover about Fibonacci retracement...### Fibonacci Numbers

Fibonacci Number is discovered by

**Leonardo Fibonacci**. The number sequence is 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144........, and so on to infinity. The sequence has many interesting properties, not the least of which is an almost constant relationship between the numbers.1. The sum of any two consecutive numbers equals the next highest number. For example, 3 and 5 are equals to 8, 5, and 8 equal to 13, and so on.

2. The ratio of any number to its next higher number approaches .618, after the first four numbers. For example 1/1 is 1.00, 1/2 is .50, 2/3 is .67, 3/5 is .60, 5/8 is .625, 8/13 is .615, 13/21 is .619, and so on. Did you notice that the ratio of number is around .618 and notice the value of 1.00, .50, .67? We will more talk about these values in ratio analyst and percentage retracement.

3. The ratio of any number to its next lower number is approximately 1.618, or the inverse of .618. For Example, 13/8 is 1.625, 21/13 is 1.615, 34/21 is 1.619.

4. The ratio of alternate numbers approach 2.618 or its inverse, .382. For example, 13/34 is .382, 34/13 is 2.615.

### Fabonacci Parcentage Retracement

The most commonly used number in percentage retracement analysis is 61.8% (usually round off 62%), 38%, 50%, and 67%. The Fibonacci square refines those numbers a bit further. In a strong trend, a minimum retracement is usually around 38%. In a weaker trend, the minimum

*percentage of retracement*is 62%.It was pointed out earlier, that the Fibonacci ratios approach .618 only after the first four numbers. The first three ratios are 1/1(100%), 1/2(50%), and 2/3(66%), Many students of Elliot may be unaware that the famous 50% retracement is actually a Fibonacci ratio, as is the two-thirds retracement. A complete retracement(100%) of a previous bull or bear market also should mark important support and resistance area.

### How can I use the Fibonacci retracement?

If you want to use the

**Fibonacci retracement**follow these steps for free-1. Open google chrome

2. Search tradingview.com

3. go to the chart section

4. open any stock that you want to analyze

5. Click the tools section fig. given below

first, click at sewing high and then second click on sewing low

This is all about support, resistance, and Fibonacci retracement if you like please share it with your friend.

In the next post, we learn Major Reversal Patterns.

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