Fibonacci Extensions and Projections

Fibonacci extensions build on the same number sequence as retracements, but instead of estimating where a pullback might end, they project how far a move could travel once the prior trend resumes.

Common extension ratios include 127.2%, 161.8%, and 261.8%, measured from the initial swing. Traders often use these projected levels as reference points for potential profit-taking areas or to anticipate where the next wave of a trend might stall.

• Three-point measurement: Extensions typically require three points: the start of a move, its retracement low or high, and the resumption point, to calculate the projected target.
• 161.8% level: This ratio is the most commonly referenced extension and is often treated as a first area of interest for a continuation move.
• Combining tools: Extensions are frequently cross-checked against prior swing highs/lows or measured-move projections for added context.