# How I Calulate the Fibonacci retracement and extensions

Education
NYSE:BE   Bloom Energy Corporation
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This uses BE as an example of what I do when I calculate the Fibonacci retracements and extensions, which are used to measure corrections and future price targets.

Retracements
I start by finding the location of a correction. I define a correction as anything the closes below the 20 period moving average. The lowest point in that correction becomes the first point of my Fibonacci retracement . Then you need to find the high prior to the next correction - that will become your second point of the Fibonacci retracement . What you have after that will be the Fibonacci scale. Corrections are expected to occur between the values of .5 and .768, with many ending at .618. This is the predicted bottom of the correction.

Fib Extensions
Adding to this we can make predictions as to the next Price Target (or correction point). To so this just add a Fib Extension to your chart, the first two point reuse the two points determined with your Retracement, the third point is the actual low point of the retracement correction.

This will add a positive Fibonacci scale, which you can use to make future Price Target predictions. Typically is your retracement was between .5 and .768, you can expect the PT to be around the 1.618 on the scale.

From my diagram you can see that I have one completed correction/surge cycle which matches nicely with the expectations. There is also the next PT, which is yet to be completed, which lands us at the \$77 range.

Hopefully this is helpful, as I think it's a pretty simple yet powerful technical analysis tool!
I'm not a financial advisor and I'm not offering financial advice. Everyone should do their own homework before making any decisions!

Good luck and I'm always interested in what you think.

You sir are a scholar!
good, thanks!
Thats amazing. Does it work on the 4hr and 8r as well?
soulvibeslive
@soulvibeslive, I've actually use it in smaller time frames (15 minutes) to help figure out an entry point when I decide I want to jump in on something that is getting hot - doing this helps me to stop chasing the stock up. To see how well it would work, I'd suggest that you try in on some stocks that you're interested in and backtest it. Let me know!
soulvibeslive
@soulvibeslive, Here's an example of using it with the 3 minute... Trying to find an entry point into SUNW... worked out pretty well, not exactly at the .5, but good enough to plot approximately where the bottom might appear.