Projections from an ABC move: measure A to B, project it from C
Extensions in Module 9 used two anchors and measured beyond the leg. Projections use three. You measure the impulse from A to B, find the end of the pullback at C, and project the A to B distance from C in the direction of the trend. The 100 projection says the next leg will equal the last one, which is the oldest target idea in charting, usually called the measured move. The 127.2 and 161.8 projections say it will exceed it by those proportions. Projections differ from extensions because they move with C: a deeper pullback gives a lower set of targets, a shallower one a higher set, which makes them more responsive to what the market actually did. Many traders use both and treat the places where a projection and an extension nearly coincide as the strongest targets. This module draws the projections on gold, covers the bearish version, shows how the depth of C changes the result, and turns the levels into an exit ladder.
What a projection is and how it differs from an extension
An extension takes the size of the A to B leg and projects multiples of it from A, so that the 100 extension is B itself and the 127.2 and 161.8 sit above B by fixed amounts. A projection takes the same A to B size and projects it from C, the low of the pullback that followed B. The 100 projection is therefore not B but C plus the leg, and because C is below B, the 100 projection is above B by exactly the amount of the pullback. If the leg from A to B was two hundred dollars and the pullback ended a hundred and thirty below B, the 100 projection sits seventy above B. The two tools agree about direction and disagree about distance, and that disagreement is useful: where they cluster, the target is better supported; where they diverge, you learn how the depth of the pullback has changed the outlook.
Drawing the three points
A is the confirmed swing low that started the impulse, chosen by the rules of Module 2. B is the confirmed swing high that ended it. C is the confirmed swing low of the pullback, which means the pullback has finished and price has begun to rise again, with at least two closed candles of higher lows on the right of C. On most platforms the tool is called a trend-based Fibonacci extension or a three-point projection; you click A, then B, then C, and the levels are drawn above C. If your platform lacks the tool, the arithmetic is simple enough to do by hand: add the A to B distance to C for the 100, and 1.272 or 1.618 times that distance for the others. Draw it once, after C is confirmed, and redraw only if C is taken out, in which case the pullback has failed and the projection with it.
The 100 projection: the equal leg
The 100 projection is the measured move: the idea that a trend tends to repeat the size of its last impulse. On gold it is the most frequently reached projection and the most sensible single target from a pullback entry when no extension or structure sits closer. On a leg from 3000 to 3200 with a pullback low at 3070, the 100 projection sits at 3270, a little above the 127.2 extension at 3254, so a long from the pullback has two targets in the same region and a reason to expect profit-taking between them. Treat the 100 projection as the place where the bulk of a position comes off unless the 161.8 extension or a higher-timeframe level is close enough to justify holding for it. Trends that fail to reach the 100 projection after a healthy pullback are showing the same weakness as a leg that fails to reach the 127.2 extension, and the response is the same: take what is there and tighten.
127.2 and 161.8 projections
Beyond the equal leg, the same multiples apply, and the 127.2 and 161.8 projections mark where a move from C that exceeds its predecessor might run. Because they are measured from C rather than A, they sit higher than the equivalent extensions and are reached less often, which makes them targets for the last portion of a position on a trend day rather than for the core. The 161.8 projection from a 61.8 pullback on a two-hundred-dollar leg is more than four hundred dollars above the pullback low, which gold reaches only on the strongest days. Plan for the 100, hope for the 127.2, and let a trailing stop decide whether the 161.8 is visited. If the 127.2 projection coincides with the 161.8 extension or with a daily level, promote it to a planned target; otherwise keep it as a ceiling. A simple rule is that any projection beyond the 100 must coincide with something else, an extension, a higher-timeframe level or a round number, before it is allowed to be a planned exit rather than a trailing reference.
How the depth of C changes the targets
This is the main thing projections teach that extensions do not. The same A to B leg gives different targets depending on where C formed. A shallow C at the 38.2 projects a 100 target far above B; a deep C at the 78.6 projects one barely above it. That is sensible: a shallow pullback is a strong trend and the next leg is expected to carry further, while a deep pullback is a tiring trend and the next leg is expected to recover less. It also means the arithmetic of the trade changes with depth. A deep entry buys a better price with a nearer stop, but its projected target is nearer too, so the reward in dollars is smaller than it looks; a shallow entry has a worse price and wider stop but a further target. Module 13 puts numbers on both. The point here is that projections quietly encode the pullback-depth reading of Module 5.
Clusters: projection meets extension or structure
The most useful targets are where two different measurements, or a measurement and a piece of structure, name nearly the same price. The 100 projection and the 127.2 extension often sit within a few dollars of each other after a 50 to 61.8 pullback; the 127.2 projection and the 161.8 extension likewise. When either pair also lands at a daily resistance, a previous week high or a round hundred, you have a target with the same kind of support that Module 7 demanded of an entry. Treat clusters as the place to take the largest portion off, and treat a lone projection with nothing near it as a looser guide. As with entry levels, a target level without structure is still just a line; it is simply a line you are selling into rather than buying at. When no cluster exists and the nearest projection sits in empty space, the old high is the honest first target and the rest of the position is managed by the trail rather than by a level.
The bearish ABC
In a downtrend A is the swing high, B the swing low, and C the high of the rally that followed. The 100 projection is C minus the A to B distance, and the 127.2 and 161.8 sit below it. On a fall from 3400 to 3200 with a rally high at 3330, the 100 projection is at 3130. Gold's tendency to fall quickly means bearish projections are often reached in a single session, so exits should be resting limit orders, placed when the trade is entered rather than when the target comes into view. Everything else mirrors the long case: plan for the 100, take partials at a cluster, and treat failure to reach the 100 after a healthy rally as a sign that the down leg is losing force. The bearish C also tends to form faster than a bullish one, often inside a single session, so the drawing is made sooner and the targets are on the chart earlier than in the long case.
Where the projection fails
Two failures and one exit plan. If C goes below A, the pullback has retraced more than the whole impulse, the ABC is void, and there is nothing to project; delete it and look for a new leg. If the move from C stalls at B and cannot make a new high, the equal-leg target is not coming and the double top at B is the thing to trade, as Module 9 described. For the rest, write the exit plan as a ladder before entering: a portion at the 100 projection or the nearest cluster, a portion at the next level, and the remainder trailed beneath the shallow retracements of each new leg. The price action course covers reading the strength of the leg from C as it develops; the projection gives you the prices at which to act on that reading. If the move from C stalls short of the first rung and then prints a lower low beneath C, the projection is void along with the trade, and the chart is cleared for the next leg.
FAQ
What is a Fibonacci projection?
A three-point measurement. The leg from A to B is measured and projected from C, the end of the pullback, at 100, 127.2 and 161.8 percent. The 100 projection is the equal-leg or measured-move target. Projections differ from extensions because they move with C.
How does a projection differ from an extension?
An extension projects multiples of the leg from A, so the 127.2 and 161.8 sit at fixed distances above B. A projection projects the same multiples from C, so its targets depend on how deep the pullback went. Where the two nearly coincide, the target is better supported.
Which projection level should be my target?
The 100 projection is the most frequently reached and the sensible default for the bulk of a position, especially when it clusters with the 127.2 extension or a higher-timeframe level. The 127.2 and 161.8 projections are for the last portion on a trend day, managed with a trailing stop.
Why does a deeper pullback give a lower target?
Because the projection is measured from C, and a deeper C is lower. That matches the reading in Module 5: a deep pullback is a tiring trend whose next leg is expected to recover less. A deep entry buys a better price but projects a nearer target, so the dollar reward is smaller than it looks.
What invalidates an ABC projection?
C going below A, which means the pullback retraced more than the entire impulse and there is nothing left to project, or the move from C stalling at B without a new high. In the first case delete the drawing; in the second, trade the double top at B rather than waiting for the target.