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Fibonacci Channel

A technical analysis tool used to draw potential support and resistance levels once prices break out of the channel. More specifically, during an uptrend parallel lines are drawn below the channel equal to the Fibonacci ratios at 61.8%, 100%, 161.8%, 261.8% and 423.6% of the channel width. Theory holds that when the prices break out below the channel they will find support at one of the parallel lines. The same is true during a downtrend. This time the parallel lines are drawn above the channel to provide potential resistance once prices break out above the channel.

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