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Fib.Extension tool is applied to identify a completion point of the impulse.
In a bearish trend, the extension levels will indicate a potential level of the next lower low based on the length of the last bearish impulse.
Fib.levels that we will apply are:
1.272
1.414
1.618
The extension levels will be drawn based on XA impulse leg.
From its low to high if the impulse is bullish
and from its high to low if the impulse is bearish.
From one of the above-mentioned levels, a retracement leg will initiate.
One should apply different techniques to confirm the strength of one of these levels.
Of course other ways of application Fib.Retracement and Extension levels exist. However, these two are the most common.
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