Fibonacci Used in Stock Market Charting Analysis

Tom Gentile

Posted in
Technical Analysis

By: Tom Gentile
August 2nd, 2022

3 mins read

The Fibonacci Sequence

Leonardo de Pisa, known as Fibonacci, is a well-regarded mathematicians from the Middle Ages. He came up with the Fibonacci numbers or the sequence of numbers.

The series of numbers starting with 0 and 1, and each subsequent number is the sum of its two predecessors.

You can really get consumed in analyzing the Fibonacci sequence and your head may spin by reading something like this: In the sequence, each fourth number can be divided by 2, every fifth number can be divided by 5 and every eighth number can be divided by 8. Multiplying any number in the Fibonacci number sequence by 1,618 (Golden Ratio) gives the next number approximately.

We plan on keeping the definition and explanation to the minimum we’ve already included in this educational piece.

Fibonacci and the Financial Markets

Fibonacci can be found in nature and the human body, but where we actually search it out is in technical analysis of financial market securities.

Many charting programs have a Fibonacci Tool (some may refer to it as a Fibonacci retracement tool as it is used to see potential upcoming price levels a security will retrace to – up or down).

It is used as a tool to forecast price movement. After a run up in price or a run down in price, one can plot the Fib tool on the chart analyzing a price low to a price high in an uptrend or a price high to a price low in a downtrend.

One then tries to see what percentage price retracement zone based on Fibonacci the security may retrace to.

And like any technical analysis, if enough people use it – in  this case Fibonacci – the more likely it is to work.

Three common Retracement Numbers / Percentages in Fibonacci Analysis

The three percentage our software uses are 38.2%, 50%, and 61.8%.

50% is not a number in the Fibonacci sequence, but that percentage works so much, (because investors and traders use so much) that it is programmed in to many software’s Fibonacci tool.

There are other Fibonacci numbers / percentage that can be used. There are different securities that respond to a certain percentage more often than other percentages so to say there is one Fibonacci number that works better than the rest can be argued, but not really ascertained, (in our view).

Fibonacci on the SPY

You can use any time frame you like in your analysis (our tools defaults to a 150-period look back. A period for us is usually a trading day).

The tool again takes a price low to a price high in an uptrend or a price high to a price low in a downtrend. Looking to see a possible area the SPY would retrace to over this 150-period of time we can see it may be at a resistance point right now.

SPY is at the 38.2% retracement level (the tools also give the security price at that percentage level).

Figure 1: 150-day Candle Chart with Fibonacci
Figure 1: 150-day Candle Chart with Fibonacci

One additional thing that can be considered now is to assess a price level SPY could roll over or down to if this 38.2% Fibonacci level becomes resistance.

Zoom in the date range of the recent up trend leg and plot the Fibonacci tool on the chart and one can see the Fibonacci retracement levels over that range of days.

Figure 2: SPY 35-day Candle Chart with Fibonacci
Figure 2: SPY 35-day Candle Chart with Fibonacci

Which zone will it retrace to? That is to be determined.

The SPY may not roll over at this price level. It may continue higher as there is a 50% and a 61.8% Fib level higher on the chart.

App: Toms Option Tools

Toms Option Tools scan the markets for bullish and bearish trade opportunities using our proprietary scans and strategy algorithms. TTR Darknet finds bullish entries based on triple stack channel collisions. Money Calendar identifies seasonal patterns with at least 90% accuracy looking back 10 years. Weekly Cash Clock finds short term opportunities that last a week on average. Microcurrency Trader applies Darknet technology and moving averages to cryptocurrencies. Velocity Trader utilizes volume spike and Velocity indicators on custom stock lists. Quantum Scripts scans the markets for momentum acceleration signals and employs Quantum noise filters. Optimal Trader finds directional pre-earnings opportunities that are optimized for entry date, stock movement, and volatility surge. My Trades tracks the profit/loss of your trades, displays stock charts and risk graphs, creates new trades, and edits existing trades. Morning Report provides top 10 option rankings in 6 categories each day.


Stock and options trading has large potential rewards, but also large potential risk.

You must be aware of the risks and be willing to accept them in order to invest in the stock and options market. Do not trade with money you cannot afford to lose.

This is neither an offer to buy/sell/ or recommend a particular stock or option.

Hypothetical or simulated performance results have certain inherent limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been actually executed, the results may have under or overcompensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with hindsight.

No representation is being made that any account will or is likely to achieve profits or losses similar to those shown.

Disclaimer of Warranties and Liabilities Tom Gentile and TomsTradingRoom, LLC including employees, consultants, and editors (“Publisher”) cannot and do not warrant the completeness or accuracy of the content found in our areas, or its usefulness for any particular purpose.

Tom Gentile and TomsTradingRoom, LLC also make no promises that our content or the service itself will be delivered to you uninterrupted, timely, secure, or error-free. Under no circumstances will Tom Gentile and TomsTradingRoom, LLC be liable for direct, indirect, incidental, or any other type of damages resulting from your use or downloading of any content on our site.

This includes, but is in no way limited to, loss or injury caused in whole or in part by our negligence or by anything beyond our control in creating or delivering any portion of Tom Gentile and TomsTradingRoom, LLC.

You are agreeing that you bear responsibility for your own investment research and investment decisions. You also agree that Tom Gentile and TomsTradingRoom, LLC will not be liable for any I, investment decision made, or action taken by you, or others based upon reliance on news, information, or any other material published by Tom Gentile and TomsTradingRoom, LLC.

Tom Gentile and TomsTradingRoom, LLC relies on various sources of information that we believe to be accurate and reliable. However, we make no claims or representations as to the accuracy, completeness, or truth of any material contained on our site.

Tom Gentile and TomsTradingRoom, LLC are educational portals, providing content for educational and informational purposes only. Neither Tom Gentile nor TomsTradingRoom, LLC are a broker/dealer. Investors need a broker to trade stocks and options and must meet certain requirements. All securities, futures, and investments data and ideas are offered to self-directed investors. All prices in USD unless noted otherwise.

A full disclaimer can be found here:

Sign Up Now for Free Education!