I've never seen the typical fibonacci retracements used this way, but I've found it to be very powerful. The typical use of a fibonacci retracement is to take a measurement of an existing move's high and low and look for percentages of that move. Instead, look at the move SO FAR and determine how it "fits" within a larger set of fib levels. Then, use this to determine where the next support and resistance levels could be in the future. Think of it as price climbing up or down a ladder.
OIL Daily - The following series of charts is of OIL on the daily. This may not be the best example, since the recent move was parabolic, but regardless, it's interesting to see it still move technically. Back on 2/18, if you thought OIL was going to go up, you could throw the following fib levels on the chart. All I did is select the bottom of the move and make the bars "fit" neatly within the fib levels. In this example, the 2/18 fit nicely within the 52.8% and 78.6% levels. There is nothing special about 25.34 other than it was where the levels seem to fit so far in the move.
Fast forward to the next day and you can see we already broke out the top of our fibs. So, we just redraw. I've found a good starting place is to extend the fib levels so the 61.8% level is where the 38.2% level was. In this case, stretch the levels so 61.8% is at 24.48 (shown in the next chart).
As described above, the fibs were stretched so the 61.8 level is at 24.48. Now, we have levels above as potential resistance/support levels (i.e. 25.86, 26.18, 26.71, etc)
Here is the chart just one day later. OIL hit that 26.71 and pulled back. Interesting.
So, we stretch the fib levels once again; doing the same thing as above, where we stretch the levels so the 61.8% level is where the 38.2% level was. In this case 25.33. This gave us even more support/resistance levels to watch for. Below is the current chart, all the way to today's price action. You can see how yesterday's action fit very nicely between the 14.6% level and the 23.6% level. Did we come back down today to retest the 14.6% level before going higher?
OIL Weekly - I've found this technique works on all time frames. Here is the OIL weekly chart. I pulled the fibs from the major low we had back at the beginning of 2009 and stretched it to make the fib levels "fit", which is highlighted by the blue arrows. Will we make it up to 30.24?
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