How to use Fibonacci projection

There’s a lot happening in the biotech sector. 

Today, Wednesday, 10/7/20, will be a Fibonacci 144 days from the low of March 16th, this year.

If the all-time high (IBB) was reached on July 20th, Fibonacci day 89 (minus 1), then today may be a critical juncture for the sector.

The current move off the low on September 4th, could be a counter-trend move.

Using the Fibonacci projection tool … a standard addition to most chart packages, we see a possible 1:1, a-b-c projection to the 141.28-area.

Counter trend moves (a-b-c), typically have equal ‘a’ and ‘c’ waves.  The ‘b’’ wave in this case was 76.4%, of the ‘a’ wave … deeper (weaker) than normal.

It just so happens the 141.28- area of IBB also corresponds to a Fibonacci retrace of 76.4% from the 9/4/20, low. 

If IBB reaches those levels today and stalls, it’s an indication that at minimum, the market respects this area.

What happens next? 

To go short (not advice, not a recommendation) is selling into a rising market. 

Technical indicators, MACD, moving averages are all pointing up both on daily and weekly .. although weekly MACD lines are still in a bearish cross-over.

Certainly it’s the danger point. That’s what we’re looking for. 

It’s the trader’s discretion on what to do if/when IBB reaches 141.28. From this firm’s perspective, price action behavior itself at the projected level will be the arbiter.

Note:  Posts on this site are for education purposes only.  They provide one firm’s insight on the markets.  Not investment advice.  See additional disclaimer here.

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