Leonardo Fibonacci was the son of a successful merchant. While working alongside his father he studied Hindu-Arabic mathematics and from these studies he inspired western society to move from the Roman Numeral System to the Hindu-Arabic Numeral System we use today. Leonardo Fibonacci introduced many other Hindu-Arabic mathematic concepts to the western world but none were as pervasively rooted in the foundation of our everyday life as what is now known as the Fibonacci Sequence.
This sequence is the foundation for the Golden Ratio found in everything from the building blocks of the cosmos to art and architecture. You can see its presence when the ratio of a given number’s adjacent higher number is .618, and lower number is 1.618. What does this have to do with trading? If this pattern is seen throughout nature, could it also be seen in financial trends? Today’s chart puts Fibonacci to work and lets NinjaTrader do the math on a Daily $ES Chart. After simply finding the recent high and low, followed by a click and drag we can see the horizontal lines indicates clear areas of support or resistance.
In today’s chart of the Week we traced the two lows and high over 9 weeks to gain perspective for the next 5 weeks with NinjaTrader’s preloaded Fibonacci Extension drawing tool. With this tool we see the ES dancing in and around the horizontal Fibonacci lines between week 10 and 13. Then at the 61.80% line we see a trend reversal. Was this trend reversal predictable using the right tools? Can you use NinjaTrader’s preloaded Fibonacci Extension Tool and Kinetick End of Day data to identify patterns in the market and estimate areas of support and resistance? Give it a try! Download NinjaTrader free for advanced charting, market analytics and simulated trading.