3. Fibonacci Fans
Fibonacci fan is composed of diagonal lines. After the high and low of the chart is located, an invisible vertical line is drawn though the rightmost point. This invisible line is then divided into 38.2%, 50% and 61.8%, and lines are drawn from the leftmost point through each of these points. These lines indicate areas of support and resistance. Take a look at the chart below:
Fans
Fibonacci Fan Lines are displayed by drawing a trendline between two extreme points, for example, a trough and opposing peak. Then an "invisible" vertical line is drawn through the second extreme point. Three trendlines are then drawn from the first extreme point so they pass through the invisible vertical line at the Fibonacci levels of 38.2%, 50.0%, and 61.8%.. (This technique is similar to Speed Resistance Lines.)
The following chart of Texaco shows how prices found support at the Fan Lines.
Once you have established your start and end points, an imaginary line is then plotted, running vertically from your end point to the price of your start point. The Fan lines are then drawn from your start point outward and intercept the imaginary vertical line at intervals of 23.6%, 38.2%, 50%, 61.8%, 100%, 161.8%, and 261.8% of the distance between the price of the start point and the end point.
Fibonacci Fans
Fibonacci Fan lines take their name from their obvious fanlike appearance. They are generated by first drawing a trendline between two extreme points, i.e. trough and peak. Next, an "invisible" vertical line is drawn through the second extreme point. Three lines are then drawn from the first extreme point passing through the invisible vertical line with their slopes at the Fibonacci levels, usually 38.2%, 50.0% and 61.8%.
As the daily prices pass these three fans, one can make predictions about future price movements based upon the appearance of price resistance or support at these intersection points. When the prices hold at the fan line, there is support there. If they quickly move through the fan line, do not look for support until the next fan line is met.
Fibonacci Fan
A charting technique consisting of three diagonal lines that use Fibonacci ratios to help identify key levels of support and resistance.
Investopedia Says: Fibonacci fans are created by first drawing a trendline through two points (usually the high and low in a given period), and then by dividing the vertical distance between the two points by the key Fibonacci ratios of 38.2%, 50% and 61.8%. The result of these divisions each represent a point within the vertical distance. The three 'fan' lines are then created by drawing a line from the leftmost point to each of the three representing a Fibonacci ratio.
Fibonacci Fan lines are drawn using the ratios .618, .5 and .382, from the same high or low point. An invisible vertical line is drawn through the second extreme value..i.Fibonacci:fan lines;.i.Fibonacci:arcs; This vertical line is then divided into three using the fibonacci ratios. Three trend lines are then drawn connecting the first significant point and each of the dividing points on the invisible line.
Arcs combine time and price to display expected containment of price action over time. Circles are used to identify the significant high and low used for these indicators. Note how prices found support, after the significant high at the outer arc.
Notes:
Fibonacci fans are created by first drawing a trendline through two points (usually the high and low in a given period), and then by dividing the vertical distance between the two points by the key Fibonacci ratios of 38.2%, 50% and 61.8%. The result of these divisions each represent a point within the vertical distance. The three 'fan' lines are then created by drawing a line from the leftmost point to each of the three representing a Fibonacci ratio.
Fibonacci Fan
Fibonacci Fan as a line instrument is built as follows: a trend line � for example from a trough to the opposing peak is drawn between two extreme points. Then, an "invisible" vertical line is automatically drawn through the second extreme point. After that, three trend lines intersecting this invisible vertical line at Fibonacci levels of 38.2, 50, and 61.8 percent are drawn from the first extreme point.
These lines are considered to represent support and resistance levels. For getting a more precise forecast, it is recommended to use other Fibonacci instruments along with the Fan.