what do fibonacci retracement levels tell you 
fibonacci retracements can be used to place entry orders determine stop loss levels or set price targets for example a trader may see a stock moving higher after a move up it retraces to the 61 8 level then it starts to go up again since the bounce occurred at a fibonacci level during an uptrend the trader decides to buy the trader might set a stop loss at the 61 8 level as a return below that level could indicate that the rally has failed fibonacci levels also arise in other ways within technical analysis for example they are prevalent in gartley patterns and elliott wave theory after a significant price movement up or down these forms of technical analysis find that reversals tend to occur close to certain fibonacci levels market trends are more accurately identified when other analysis tools are used with the fibonacci approach fibonacci retracement levels are static unlike moving averages the static nature of the price levels allows for quick and easy identification that helps traders and investors to anticipate and react prudently when the price levels are tested these levels are inflection points where some type of price action is expected either a reversal or a break fibonacci retracements vs fibonacci extensionswhile fibonacci retracements apply percentages to a pullback fibonacci extensions apply percentages to a move in the trending direction for example a stock goes from 5 to 10 then back to 7 50 the move from 10 to 7 50 is a retracement if the price starts rallying again and goes to 16 that is an extension limitations of using fibonacci retracement levelswhile the retracement levels indicate where the price might find support or resistance there are no assurances that the price will actually stop there this is why other confirmation signals are often used such as the price starting to bounce off the level the other argument against fibonacci retracement levels is that there are so many of them that the price is likely to reverse near one of them quite often the problem is that traders struggle to know which one will be useful at any particular time when it doesn t work out it can always be claimed that the trader should have been looking at another fibonacci retracement level instead 