Now that we’ve covered the basics of using the Fibonacci retracement tool from the most recent swing low to swing high in an uptrend, what do you do when a stock in an extended uptrend forms multiple swing lows?
Remember, a stock in an uptrend will form higher highs and higher lows. Each one of these higher lows could be a starting point for drawing a retracement grid to the most recent swing high.
Fibonacci Confluence is when retracement levels from different fib grids coincide at a certain price level giving
the trader a likely price zone for predicting support or resistance. More advanced Fibonacci traders will look to find confluence by drawing multiple retracement grids starting at different key swing lows and ending at the most recent swing high. Using this method of overlapping retracement grids, traders are able to find confluence zones between the different fib grids giving them an edge over traders who just use single retracement grids.
In this video, I give some simple examples of finding Fibonacci Confluence in an uptrend and downtrend as a stock starts to retrace.
Click Here for Part 1: How To Use Fibonacci Numbers in Trading and Investing
Click Here for Part 2: How To Use Fibonacci Retracements in Trading and Investing