Level 3: Technical ToolkitInteractive
Fibonacci Retracements and Extensions
22 min readUpdated Mar 2026
Quick Check
The key Fibonacci ratios come from:
The 38.2% retracement level suggests:
The key Fibonacci ratios come from:
The 38.2% retracement level suggests:
Fibonacci retracements are horizontal lines that indicate potential support and resistance levels during a price pullback. The key levels are 38.2%, 50%, and 61.8% of the prior move. Traders use them to identify where a pullback might reverse and the original trend resume, particularly when they align with other technical evidence.
Fibonacci levels mark potential and zones during pullbacks. They work in part because many traders watch them. When thousands set entries, stops, and targets at the same levels, those levels become self-fulfilling.
Example: Stock rallies $100 → $150, then pulls back. The 38.2% level is $130.90, 50% is $125, 61.8% is $119.10. If the pullback finds support at one of these and bounces, it confirms a retracement entry.
Extensions project where the next leg might reach, beyond the 100% level.
Example: Rally $100 → $150, pullback to $130 (38.2%). Extension targets: 127.2% = $163.60, 161.8% = $180.90.
Fibonacci levels alone are not enough. They become high-probability when they align with other evidence:
The Rule
A 61.8% retracement at a clear horizontal support with a bullish candlestick pattern is actionable. A 61.8% retracement in the middle of nowhere with no other confirmation is not.
Fibonacci Trade Setup
Draw Fibonacci from $80 swing low to $100 swing high. Price pulls back to $92 (near 38.2%). Bullish engulfing forms. Enter $93, stop $88 (below 50% at $90). Target: 127.2% extension at $105.44. Risk: $5, Reward: $12.44. R:R = 2.5:1.
Key Takeaways
Try This
Pick a stock with a recent clear swing move. Draw the Fibonacci retracement. Which level is closest to a known horizontal S&R? That confluence zone is where you would watch for a pullback entry.
Log Fibonacci-based entries in your Swingfolio journal and track hit rates at each retracement level.
Start Tracking FreeDisclaimer
This educational content is for informational purposes only and does not constitute financial advice. Past performance is not indicative of future results. Trading involves risk of loss. You should consult a qualified financial advisor before making investment decisions. Swingfolio is a trade journaling tool, not a financial advisory service.