Chartist's Corner - June 2019
Leonardo Fibonacci was a 13th Century mathematician who developed the Fibonacci sequence; a quick search on the internet will tell you a lot more about them but the main reason they are important is how they appear unexpectedly often in mathematics.
One of the keys parts for technical analysis if the 61.8% ratio; this is because in the Fibonacci sequence dividing any number by the number that follows it equals 61.79%! Similar ratios also exist at 38.2% and 23.6%. These numbers – for unknown reasons – play an important role in many areas from nature (the spiral of a shell) to the Stock Market.
Take a look at the chart of the FTSE-all Share over almost 40 years and look how often the index have been changed direction at these key levels – we have marked some big Bull (green) and Bear (red) markets as an example.
This type of analysis is only part of our the picture, but none the less shows us some interesting history and key levels where turning points could occur.