••••
CO L U M N
Safex Scenarios
with Susari
SUSARI GELDENHUYS
INTRODUCTION
South African grain prices are
known for being very volatile due
to uncertainty about what the
future may hold for the grain mar
ket. Future stock levels, imports,
hectares planted and yields are
but a few of the factors which
created uncertainty (and therefore
price volatility) in the market.
The recent transition from the old
season with low stock levels to the
new season with more favourable
production expectations is proof
of this. These volatile conditions
make it very difficult for market
participants to make good hedg
ing and investment decisions.
However, there are two general
aids in the form of fundamental
analysis and technical analysis
which will contribute to a higher
probability of success when such
decisions are considered.
Fundamental analysis and the
basis of technical analysis were
discussed in previous articles. The
last few articles focused on deter
mining support and resistance
levels. This article will specifically
focus on Fibonacci-numbers as a
technical indicator.
FIBONACCI – BACKGROUND
The unique series of numbers,
known as Fibonacci, was discov
ered in the thirteenth century
by the Italian mathematician,
Leonardo Pisano. Fibonacci is
a series of numbers where the
subsequent number is calculated
by the sum of the two preceding
40
numbers. In other words: 1, 1,
2, 3, 5, 8, 13, 21, 34, 55, 89,
144, etc. Pisano noticed this series
of numbers during research on
the expected population growth
of rabbits. The unique series of
numbers was subsequently con
tinuously noticed in nature. Some
of the most well-known examples
include the Nautilus shell (Figure
1), seed-heads (e.g. the sunflower
– Figure 2), the natural spiral in
the galaxies (Figure 2) and hur
ricanes (Figure 2), to name but a
few.
Figure 1: Nautilus Shell
SOURCE: http://invivomagazin.sk
Figure 2: Fibonacci in Nature
JUN/JUL 2017 • SENWES Scenario
FIBONACCI – TECHNICAL ANALYSIS
The Fibonacci numbers are used
in the financial world as well,
more specifically in technical anal
ysis, where the series is analysed
in terms of percentages. The rela
tionship is represented as follows:
23.6%, 38.2%, 50% 61.8%,
78.6%, 100%. Accordingly this
relationship can be used to iden
tify support and/or resistance
levels by linking the Fibonacci-
percentages to price movement
percentages, particularly in the
case of upward or downward
trends. Fibonacci can therefore
be analysed in two different ways,
namely retracements and projec
tions.
Should a significant high and
low be determined (as graphically
represented in Graph 1), it would
be possible to determine various
levels for retracements within the
high and low. Graph 1 indicates
a downward trend (with Point A
and Point B being the high and
low respectively), with retrace
ments (Point C – Point E) on the
61.8% Fibonacci-line. Please note
that the market found support
various times at 38.2% (Point
SOURCE: http://designschool.canva.com