The percentage retracements identify possible support or resistance areas like 23.6%, 38.2%, 50%, 61.8% and finally 100%. Applying these percentages to the difference between the high and low price for the period selected creates a set of price objectives. For example, when a stock is in an uptrend then the first retracement happens at 23.6%, the second retracement at 38.2% etc.

Depending on the direction of the market, up or down, prices will often retrace a significant portion of the previous trend before resuming the move in the original direction. These countertrend moves tend to fall into certain parameters, which are often the Fibonacci Retracement levels. Fibonacci series of structure are known to apply to most random structures including engineering, quantum physics, price movements, art etc. Fibonacci numbers are a sequence of numbers in which each successive number is the sum of the two previous numbers. An example of the Fibonacci series is as follows: 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233, and so on. The Fibonacci series for the first 40 such numbers will look like the table below:

Fibonacci Series of the first 40 numbers will look as under

1

89

10,946

13,46,269

1

144

17,711

21,78,309

2

233

28,657

35,24,578

3

377

46,368

57,02,887

5

610

75,025

92,27,465

8

987

1,21,393

149,30,352

13

1,597

1,96,418

241,57,817

21

2,584

3,17,811

390,88,169

34

4,181

5,14,229

632,45,986

55

6,765

8,32,040

1023,34,155