The Market’s Secret Code: Why Fibonacci Levels Keep Showing Up

In this 10-minute video, JC Parets breaks down the core principles behind Fibonacci retracements and extensions — explaining why these seemingly “magic” levels show up on so many charts, and how traders can use them to identify key support, resistance, and price targets.

This clip was excerpted from the full-length Friday Lab session, available exclusively to TrendLabs members.

Hey, everybody. JC Parets here, and we are back at the lab.

This is something we’re going to do every Friday — really dive into something that’s valuable to our process.

And today, we’re talking about Fibonacci.
Both retracements and extensions.

You’ve seen these lines on all our charts. So I think it’s important for you to understand what they mean. Like… are they just made-up lines that JC is throwing out there? Is the price of a stock randomly stopping at these “magic” levels drawn after the fact — or were those lines there before?

Right? So… let’s talk Fibonacci.

We’re talking about Big Leo — Leonardo Fibonacci of Pisa. He was an Italian mathematician in the 13th century. But the truth is, this math goes back even further — to 200–300 BC in India, where a fellow named Pingala discovered this same pattern in language, using syllables and structure.

The Italians get the credit — and we give it to them — but shoutout to India. Based on my research, the Indians found it first.

That said, let’s focus on Leonardo Fibonacci.

Here’s an old S&P 500 chart — from the highs during the Great Financial Crisis down to the bottom in March 2009. A 100% retracement would be getting back to those former highs. But then extend that move another 61.8% — and it takes you to around 2,140.

Guess where the market topped in 2015?
Right there.
Massive correction followed.

So I ask again: was that just a coincidence?

I don’t think so.
In my experience — absolutely not. I look at a lot of charts. I wouldn’t waste my time drawing these levels if they weren’t helpful. These Fibonacci ratios show up all over the world — not just in the stock market.

You see them in our DNA.
In weather systems.
In ocean waves.
In plant life.
In our arms, our ears, our fingers.
In Roman architecture. The Mona Lisa.
It’s everywhere.

Now, here’s a fun fact: in the Fibonacci sequence, you get the next number by adding the previous two. 2 + 3 = 5. 5 + 8 = 13. 13 + 21 = 34. And on and on it goes.

So why does this matter in markets?

When you divide two adjacent numbers in the sequence, you get what’s called the golden ratio. That’s 0.618. Every time. The further out you go, the closer you get to exactly that number.

Flip it — divide the larger number by the smaller one — and you get 1.618. That’s the other key level.

Why do these matter?

Because time and time again, we see markets stop at 61.8% retracements of major moves — whether it’s a bounce after a decline or a pullback during a rally.

For example:

  • JPMorgan Chase: Monster rally off the 2009 lows. Pullback stopped exactly at the 61.8% retracement.
  • Chevron: Same thing. Rally from the 2002–2004 period, pullback ended at the 61.8% level.
  • XOP (Oil & Gas ETF): Highs in 2011, lows later that year — full retracement, breakout, and stopped precisely at the 161.8% extension.

Is that a coincidence?

I don’t think so.

Same thing with Tesla. 2014 highs to 2016 lows — stopped rising at the 161.8% extension.

Same thing with the Euro vs. USD — topped out after a rally and reversed right at that key Fibonacci extension level.

You can take this even further: divide numbers two or three places apart in the sequence — and you get 2.618, 4.236, and beyond. These are also key levels that show up again and again in the market.

Example:

  • Consumer Discretionary ETF: 2007 highs to 2009 lows — where did it top in the following years? Exactly at the 261.8% extension.
  • Dow Jones Industrial Average: 2007 highs to 2009 lows — topped in 2018 right at the 261.8% extension.

These aren’t just numbers.
They are levels the market respects.

So whether we’re setting stop-losses or upside targets, Fibonacci helps us manage risk and plan trades in a structured way.

I hope this session helps you understand why these lines are on so many of our charts.

I’m JC Parets. This has been the Fibonacci Lab session.
Thanks for being here — and I’ll catch you on the next one.

Adios.

JC Parets, CMT
Founder, TrendLabs
June 2025