Fibonacci Numbers

You will find many occurrences of fibonacci numbers in the stock market. 

The fibonacci sequence is a series of numbers that takes the previous number and adds it to the current number to get the next number in the sequence.

Something like this:

1 ,  1  ,  2  ,  3  ,  5  ,  8,  13  ,  21  ,  34  ,  55  ,  

For instance, the previous number of 2 added to the current number of 3 gives the next number of 5.  Three added to five is eight.

Continuing the series:

34  ,  55  ,  89  ,  144  ,  233  ,  377  ,  610  ,  987,  etc.

The sequence continues forever.

Fibonacci numbers in the stock market

See how these numbers play into the stock market.  Here's the Nasdaq 100 tracking stock, QQQ, with the number of trading days labeled from the April 4th, 2001 low using the Fibonacci sequence.

Notice that the May 2001 high occurred just one day prior to the Fibonacci number 34.

Is is coincidental?  Let's continue with this example.

Almost one and a half years later, the QQQ makes a significant low exactly on a Fibonacci number - 377 trading days later on October 8th, 2002.

Time the stock market

Using Fibonacci numbers is another method of predicting possible turning points.

While the chance of identifying trading opportunities - to the day - might seem impossible, fibonacci numbers do provide a time target which often predict an important turning point.

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