In this post I will show you how to use Fibonacci retracement levels in reverse. Normally we use Fibonacci to find support levels within a correction downtrend. Resistance levels are usually identified by previous highs, but what if the stock is making all time new highs - for example GOLD. Let's use the Fibonacci tool to find the next resistance level in GOLD's uptrend.
The idea is to find the best fit for the Fibonacci levels. This is subjective, but using the most powerful computer on earth, the human brain, any one can use this simple approach. Note that each time GLD reached the upside target it retraced to the 38.2% Fibonacci level. This is saying that GLD upside target is around $160. What are the gold miners going to do? Lets use GDX - a proxy for the $HUI index:
It all lines up quite nicely. GDX is sporting a classic reverse head and shoulders pattern. The upside target for the breakout is $31 above the neckline at the breakout point. In order to line up with the Fibonacci target, the breakout is expected to be very soon ...
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