Fibonacci’s and the Nasdaq 100

• Posted by Greg Harmon
• on July 18th, 2017

Traders often use the Fibonacci Sequence and Golden Ratio in planning their trades. The Golden Ratio, φ, is the limit of the ratio of adjacent Fibonacci numbers in the sequence as it progresses higher. It is approximated as 1.618, ans often quoted as its reciprocal, 0.618. This ratio is pleasing to the eye as it shows up through out nature, and traders then have translated that to pullbacks in markets as well. Whether you believe it or not, knowing that many traders will key off of these numbers and ratios is important. And they are showing up in the Nasdaq 100 ETF right now in 3 ways.

The first one to notice is the pullback from the all-time high in June. On the final bottom in early July the price had retraced almost 61.8% of the move higher from the April low. The second is part of the structure of that jagged pullback. It is a harmonic pattern, a bearish Shark, that keys off of pullbacks and extensions within ranges defined by Fibonacci ratios. The Shark is bearish because upon completion it gives a level to trade against as a reversal. In fact a Shark gives 2 levels to trade against, Potential Reversal Zones (PRZ). The first is at a 88.6% retracement of the first leg lower, the second at a 113% extension of that 1st leg. the 88.6% is the 4th root of the 0.618 ratio and 113% is its reciprocal. This then gives two targets to the upside before a possible reversal in the QQQ, 143.17 and 144.73. The trigger for a reversal would be a move through these targets and then lower close.

The third is the most simple. The all-time high at 143.90 is just 10 cents below 144. A move over this would signal a higher high and a trend resumption to the upside. 144 is the 12th number in the Fibonacci Sequence, and shows up many places in life. It is 12 squared, or a gross. This is also a easily recognizable number. Is it just a coincidence that the QQQ stalled and has reacted as it has over the last 2 months? Maybe not.

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