Fibonacci retracement

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Fibonacci retracement

Please make sure you have the most updated mfd_dm and mfd_ta packages for Stata installed for this post.

Fibonacci sequence is famous. One of many uses of Fibonacci sequence is in financial technical analysis. After each increasing or decreasing trend, technical analysts expect a correction. This correction can be a new trend setter or simply mark resistance/support levels. Here, Stata code is provided for commonly used Fibonacci retracement levels: 23.6%, 38.2% and 61.8%. Along with these lines, 50% and 100% are also included.

Fibonacci retracement from a drop

The resulting chart looks like the following.
fibonacci_from_drop

Fibonacci retracement from an increase

The resulting chart looks like the following.
fibonacci_from_increase

Alternative method