Figure 3: Using Fibonacci Retracement lines as support and resistance level

As observed from Figures 1 & 2, Fibonacci Retracement Levels offer very strong support or resistance to the price movement. In Figure 3, we can see that Luzhou’s stock prices were able to find good support at the 50.0% line from Oct 2006 to Jan 2007. However, in the month of March the 50.0% line turned from support to resistance, resisting Luzhou’s price from heading higher. Similarly in the month of April, Luzhou’s price found resistance at the 61.8% line and went into a downtrend shortly thereafter.