Fibonacci ratios and the Sensex

The ET carries Sensex 2008 target estimates made using the Fibonacci ratios - 0.382, 0.618, 1.618, and 1. The estimations of the yearly closing target, done based on the difference between the lowest and highest monthly closes, multiplied by the Fibonachi ratios, and then added to the highest monthly closing of the previous year, revealed striking similarity with the actual performance for four years from 2004 to 2007. In fact, at least one among these Fibonacci ratios has given a target that is in a range of +/- 5% of the final realised value of the Sensex for the next year.The table below reveals the similarity



The graph below charts the highest-lowest monthly closing trends for the past four years.



With this method of technical analysis, the Sensex 2008 is estimated to be 23094.27, 24828.61, 27635.89 and 32177.51 respectively, for the four Fibonacci ratios. Let us revisit this post on 31, December 2008!