By Jeremy Wagner,

25 January 2011 20:46 GMT

25 January 2011 20:46 GMT

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Fibonacci Time Zones,

Arcs,

Fans,

Retracements,

Fibo Channel

Fibo Expansion

All of these studies are based on an interesting discovering made by an Italian mathematician Leonardo Fibonacci, who lived in a 12th century.
While studying the Egyptian pyramids he established a numerical pattern.

Fibonacci Numbers are a numerical sequence, in which subsequent number is equal to the sum of the previous two.

Here is a sample:
1,1,2,3,5,8,13,21,34,55,89,144,233,377 etc.

The Fibonacci numbers have a lot of mysterious properties.

For example, any Fibonacci Number approximates the product of the previous number multiplied by 1.618, or the product of the subsequent number multiplied by 0.618.

The Fibonacci studies allow us to create on a price chart several lines that stand apart from each other, a distance equal to the Fibonacci numbers.

For instance, Fibonacci Times Zones represent vertical lines spaced at intervals of 1,2,3,5,8,13 etc.
The interpretation of Fibonacci Studies in technical analysis is based on two assumptions.

One. The changes in trend occur regularly on the borders of a Fibonacci lines.

Two. The Fibonacci lines also serve as levels of support and resistance.

We have maintained a bullish USDJPY bias since prices broke out of a falling channel established in early 2010. While a rally has failed to materialize so far, with prices edging sideways in choppy consolidation, a well-defined Bullish Engulfing candlestick pattern hints that an advance may finally begin to gain momentum. Positioning remains indecisive however and we will look for confirmation on a break above the recent range top in the 84.00-85.00 region before entering long.

To discuss these strategies with other traders, please visit the Candlestick Forum

To receive future articles by email, please contact Ilya at ispivak@dailyfx.com

The Falling Three Methods Pattern is a continuation pattern, which shows a temporary break in the trend of prices without causing a reversal. The pattern is characterized by a long black candlestick during a downtrend, which is then followed by small consecutive small bodies that look like a short uptrend. It is better if all the bodies of these three days are white however they can also be of mixed color. These small bodies however must all remain within the high-low range of the first day’s black candlestick. The pattern is completed by a long black candlestick, closing at a new low and showing that bears are finally taking over. The small uptrend between two long black days simply shows a market break. After this temporary break, the downward trend continues.

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