Fibonacci Clusters

A Fibonacci cluster arises when retracement levels from different swings coincide at the same price level. Example: if a swing from 100 to 150 has its 61,8% retracement at 119, and another swing from 90 to 140 has its 50% retracement at 115, a zone 115–119 with extra strong support is created.

The more Fibonacci levels that coincide, the stronger the cluster becomes. A cluster with 3+ levels is regarded as a 'high probability zone' where the price is likely to react. With only 2 levels, the cluster is weaker.

For Swedish retail investors, Fibonacci clusters are useful for identifying entry zones. Instead of buying 'somewhere' at a retracement, you can identify a specific zone where several levels coincide. This gives better risk/ amount control.

To build a cluster, identify 2–4 previous swings in the price. For each swing, calculate the 38,2%, 50%, 61,8%, and 78,6% retracements. Look for zones where several of these levels lie within 1–2% of each other. This is your cluster.

The process for identifying clusters: 1) Identify 3–4 clear swings in the price (both up and down). 2) For each swing, calculate the Fibonacci retracements: 23,6%, 38,2%, 50%, 61,8%, 78,6%. 3) Look for zones where 3+ levels from different swings lie within 1% of each other. 4) This zone is your cluster.

A cluster becomes extra strong if it coincides with other technical levels — old tops/bottoms, trendlines, or round numbers (100, 200, 500 kr). A cluster at 150 kr that is also a previous top and a round number is much stronger than a cluster at 147,32 kr without other references.

For Swedish retail investors, it is recommended to start with the daily chart to identify clusters. The weekly chart can be used for confirmation. Intraday clusters are unreliable due to algorithmic noise.

A common trap is 'over-fitting' — looking for swings until one finds a cluster. This gives false signals. Better: identify the clearest swings first, calculate the Fibonacci levels, and see if any cluster forms naturally.

For Swedish companies, it is worth following 5–10 companies and updating the clusters monthly. When the price approaches a cluster, prepare a buy/sell. If the price breaks the cluster with volume, the trend is probably over — the cluster was not strong enough.