50% Retracement & Fibonacci Levels [LevelUp]

The 50% retracement level has been observed by traders across Dow Theory, Gann analysis, and Fibonacci frameworks for over a century — and when that many independent methodologies agree on the same level, it's worth paying attention. This indicator brings those levels directly to your chart, automatically identifying high-probability zones where a pullback may stall and the trend resume.

Retracement refers to a price reversal after reaching a recent high or low, where price finds an area of support or resistance before continuing in the direction of the larger trend. Among the various retracement levels traders use, the 50% level has proven to be one of the most reliable and widely observed.

The 50% retracement concept has roots stretching back over a century. Charles Dow wrote about the tendency of markets to retrace roughly half of a prior move in the late 1800s. W.D. Gann incorporated it into his trading principles in the early 20th century. Fibonacci traders recognize it as sitting squarely between the 38.2% and 61.8% levels. The fact that this level appears across so many independent frameworks and methodologies is itself meaningful — it suggests the 50% level reflects something real about how markets behave rather than being the invention of any single theorist.

That something real is market psychology. After a sustained price move in either direction, two forces come into tension. Traders who participated in the move begin taking profits, while new participants — having missed the initial move — are waiting for a pullback before entering. These competing interests tend to resolve around the midpoint of the prior move, which is why the 50% level so frequently acts as a meaningful area of support or resistance.

What's important to understand is that retracement applies in both directions. When price is trending upward and begins to pull back, the 50% level of the prior advance becomes a potential area of support where the trend may resume. When price is declining and stages a bounce, that same level becomes potential resistance. This bidirectional quality makes the 50% retracement a versatile tool regardless of market conditions.

The primary reason we are interested to gauge levels of retracement is that once a retracement is complete, there is often a continuation of the previous trend.

🔹—— Retracement to Area of Support ——🔹

When price completes a sustained move upward from a recent low to a recent high, traders watch for a pullback to the 50% level of that move as a potential area of support. For example, if a stock climbs from $50 to $100, the 50% retracement level sits at $75 — the midpoint of the move. As price pulls back toward that $75 area, it becomes a high-probability zone where buying interest may re-emerge and the uptrend resume.


🔹—— Retracement to Area of Resistance ——🔹

Retracement works in the other direction as well. When price completes a sustained move downward from a recent high to a new low and then begins to bounce, traders watch for that bounce to stall at the 50% level of the prior decline. For example, if a stock drops from $100 to $50, the 50% retracement level sits at $75. As price rallies back toward that $75 area, it becomes a high-probability zone where selling pressure may re-emerge and the downtrend resume.


🔹—— Direction of Retracement ——🔹

When measuring from a recent low to a recent high, the retracement levels plot downward from the high. If multiple levels are displayed, they are ordered from smallest retracement percentage at the top to largest at the bottom.

When measuring from a recent high to a recent low, the retracement levels plot upward from the low. If multiple levels are displayed, they are ordered from smallest retracement percentage at the bottom to largest at the top.

See the charts in the sections above more details.

🔹—— Retracement Versus Reversal ——🔹

Retracement is a temporary counter-trend move — a pullback within an uptrend that finds support and resumes higher, or a bounce within a downtrend that finds resistance and resumes lower. The key word is temporary. A retracement does not break the prevailing trend; it tests it. A reversal, by contrast, is a more significant move that breaks the trend structure itself, signaling that the prior move may be over rather than simply pausing.

🔹—— Additional Retracement Levels ——🔹

When working with the indicator, you can choose your preference for additional retracement levels.

Classic Retracement Levels — 33%, 50%, 66%
These levels are rooted in Dow Theory, one of the oldest frameworks in technical analysis. Dow theorists observed that healthy trend corrections tend to retrace between one-third and two-thirds of the prior move.

A pullback that holds above the 33% level suggests strong underlying momentum, while a retracement approaching 66% represents the outer boundary of what the trend can absorb before the move is considered compromised. Traders who prefer round numbers, clean structure, and a methodology with deep historical roots in price action tend to gravitate toward these levels. W.D. Gann also referenced these levels alongside his 50% work, so there's overlap in his methodology as well.

Fibonacci Levels — 38.2%, 50%, 61.8%

These levels derive from the Fibonacci sequence and the golden ratio, mathematical relationships that appear throughout nature and have been applied to financial markets since the mid-20th century. These levels are now among the most widely watched in technical analysis, which creates a self-reinforcing dynamic: because so many traders are aware of them, price tends to react at these levels with some frequency. Traders drawn to mathematical precision, or who use other Fibonacci-based tools in their analysis, often find these levels integrate naturally into their existing approach.

In practice, the 33%/38.2% pairing and the 66%/61.8% pairing are close enough that they often point to the same general zone on a chart. The choice between them comes down to your broader methodology and what you're already using. If your system is built around classical price action and trend analysis, the Classic levels will feel like a natural fit. If you're already working with Fibonacci extensions, fans, or time analysis, the Fibonacci levels will keep your toolkit consistent.


🔹—— Automated & Manual Pivot Selection ——🔹

There are two options as it relates to managing retracement: auto-generated pivot highs/lows and manual selection of highs/lows.

Auto-Generated Pivot Highs/Lows

The default pivot highs and lows are based on traditional pivot point concepts. You set the number of bars to the left and right of a potential pivot, and the indicator identifies the high or low where no higher high or lower low exists within that range. These pivot points are then used as the anchor points for calculating retracement levels.

The main advantage of the automated approach is convenience — levels are calculated automatically as you move between symbols. The tradeoff is that auto-detected pivots can sometimes be close together in price, resulting in compressed retracement levels that offer little practical value for identifying meaningful support or resistance.

All the examples shown above are using auto-generated pivots.

Manual Selection Highs/Lows

With manual selection, you choose the pivot high and low directly on the chart by dragging the vertical line to your desired anchor points. The benefit is precision — you control exactly which price points are used, allowing you to anchor pivot points to the most meaningful highs and lows for the current chart.

The tradeoff is that when you switch to a new symbol, the same anchor points carry over, and since price levels differ across symbols, you will typically need to reposition the lines to points relevant to the new chart's price action.


🔹—— Pivot Point Extensions As Support/Resistance ——🔹

When using auto-generated pivot levels, you have the option to display horizontal lines extended from each pivot point. These lines mark the pivot highs and lows, which can serve as additional areas to watch for potential support and resistance beyond the retracement levels.


🔹—— Key Features ——🔹

▪ Classic levels (33%, 50%, 66%) or Fibonacci levels (38.2%, 50%, 61.8%).
▪ Auto-generated pivots or manual selection.
▪ Customization all levels, colors and line styles.
▪ Show lines at pivot points as potential areas of support/resistance.