What it means
Fibonacci extensions project price targets BEYOND the 100% retracement of a prior swing. Common levels: 127.2%, 138.2%, 161.8%, 200%, 261.8%. Used to project where an impulse wave is likely to terminate or pause. Calculation: project from the END of the corrective wave by the relevant ratio of the original swing. 161.8% is the 'golden extension' — most-watched single extension level.
Why it matters
Extensions provide target levels for trend-following trades. Elliott Wave practitioners use specific extensions: Wave 3 typically extends 1.618 of Wave 1; Wave 5 typically equals Wave 1 (1.0 extension); large-degree Wave 3 can extend 2.618 of Wave 1.
How to use it
Apply after identifying impulse-corrective structure. Plot Fibonacci tool from the corrective low (or high) using the impulse swing magnitude. Common targets: 127.2% (initial target), 161.8% (primary target), 261.8% (extended target). Combine with structural resistance for confluence.
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