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Fibonacci Speed/Resistance Fan Drawing Object
Speed/Resistance Fans are analytical drawing tools used to identify the and of a trend and the price level a trend correction may rise or fall. A Speed/Resistance Fan consists of an underlying trendline on which speed resistance lines are drawn above (representing time) and below (representing price). These speed lines are drawn based on time/price percentages of the distance between the beginning and end of that underlying trendline.
The most common speed line percentages used by analysts are one-third and two-thirds. However, many analysts use common numbers of 33%, 50%, and 66% as well as percentages based on the Fibonacci number series.
Speed lines combine trendline analysis with percentage retracement analysis. The difference between speed resistance lines and percent retracement is that speed resistance lines not only help to measure trend corrections but also measure the speed of a trend (the rate at which a trendline ascends or descends).
Speed/Resistance Fan levels help identify the support and resistance of a trend, or the price level to which a trend correction may rise or fall. In an up trend, a downside correction usually stops at a higher speed line and, if not, prices will probably drop to the lower speedline. If that line is broken, prices will most likely continue down to the beginning of the prior trend (or underlying trendline).
In a downtrend, the breaking of a lower speedline indicates a possible rise or rally to a higher line. If a breakout occurs above that line, the rally may continue to the top of the prior trend (or underlying trendline).
Similar to Gann Fan lines, Speed/Resistance Fan lines can also be viewed as support or resistance lines. In an up trend, a market's price usually stays above the higher speed line. If this line is penetrated, prices generally fall to the lower speed line, which in many cases becomes the support level. However, if prices break below the higher speed line (up trend correction), fall to the lower speed line, and then begin to rise, the lower speed line becomes the resistance level.
You can also use the menu for a selected object component (identified with small squares) to change the drawing properties such as Color, Style, Weight, and any object specific settings.
Drawing a Fibonacci Speed/Resistance Fan Object
Drawing objects are applied to a chart to assist with data analysis. See About Drawing Objects for more details.
- Activate a Chart Analysis window.
- From the Drawing toolbar, select Fibonacci Speed/Resistance Fan icon
from the Drawing menu. Your pointer will change to the shape of Speed/Resistance Fan.
- Click where you want the origin of the Speed/Resistance Fan to be anchored
- Move your pointer up, down, left, or right to position the Fan, then click again to insert.
- Optional. Use the Drawing > Snap Mode menu sequence to "snap" the drawing object to the open, high, low, or closing price of the first and last bars the drawing object intersects. For more information, see Snap Mode.
In an up trend, the underlying trendline of Speed/Resistance Fan should be drawn from a price trough (low) up to the next highest high or an intermediate high. In a downtrend, it should be drawn from the beginning of the downtrend to the next low or intermediate low.
Moving a Fibonacci Speed/Resistance Fan Object
After a Speed/Resistance Fan is applied to a chart, you can reposition the drawing object at any time to evaluate another group of bars.
- Activate the Chart Analysis window containing the Fibonacci Speed/Resistance Fan object, select the object (a small square at each end of the underlying trendline used to create the Speed/Resistance Fan confirms the drawing object is selected).
- Drag either end of the trendline to lengthen, shorten, or change the slope of the underlying trendline and the arcs based on this trendline. Dragging any portion of the Speed/Resistance Fan, with the exception of the squares at each end of the underlying trendline, allows you to move the Speed/Resistance Fan horizontally and vertically without changing the underlying trendline's attributes. This allows you to reposition the Speed/Resistance Fan without changing the slope of the underlying trendline or the fan lines based on this trendline.
- Optional. Use the Drawing > Snap Mode menu sequence to "snap" the drawing object to the open, high, low, or closing price of the first and last bars the drawing object intersects.
Formatting the Fibonacci Speed/Resistance Fan Settings
- Activate the Chart Analysis window containing the Fibonacci Speed/Resistance Fan object.
- Right click one any line of the Speed/Resistance Fan object. Select Format 'Speed/Resistance Fan' from the shortcut menu.
- Click the Settings tab.
- The Speed/Resistance Fan is based on an underlying trendline. Select the Trendline check box to show this underlying trendline. Clearing this check box displays the trendline on your chart.
- Select the Grid check box to draw a rectangle around the underlying trendline as well as horizontal lines where Fan lines based on the Divide Price option intersect the underlying trendline and vertical lines where Fan lines based on the Divide Time option intersect the underlying trendline.
- Under Percentage, select a check box and enter an appropriate value in the corresponding box (for example, .5 equals, 50%, .6 equals 60%, .7 equals 70%, and so on). This percentage determines at what point a Fan line intersects the underlying trendline. For example, a Fan line drawn at 40% (.40) intersects the underlying trendline at 40% of its greatest height when selecting Divide Price and 40% of its greatest length when selecting Divide Time.
When entering a percentage, the corresponding check box must be selected for that arc to be drawn.
- In the drop-down lists, select a Line Color, Line Style, and Line Weight for each segment.
- Selecting the Use the following color, style and weight for all lines check box will allow the matching properties to be used for all lines. The individual line properties will become unavailable (grayed out).
- Select the Divide Time check box to draw Fan lines based on the height of the underlying trendline.
- Select the Divide Price check box to draw Fan lines based on the length of the underlying trendline.
- Select the Hide Time check box to turn off the display of Divide Time lines.
- Select the Hide Price check box to turn off the display of Divide Price lines.
- Select the Set as Default check box to use these property settings as the default for future Speed/Resistance Fans.
- Click OK.
You can also use the menu for a selected object to change available settings.
Related Topics
Formatting the Alerts of a Drawing Object
Formatting the Labels of a Drawing Object
Formatting the Data of a Drawing Object