Gann Resistance Levels

Introduction

Gann said: every stock makes a top or bottom on some exact mathematical point in proportion to a previous high or low. By dividing the range between an extreme low and an extreme high, you can find the points where support or resistance will be met. These are called Gann resistance levels or Gann retracement levels.

Dividing the Range by 8

Take the extreme low and extreme high of an important move. Subtract the low from the high to get the range. Divide the range by 8 to get the eighths. These are the key levels:

• 1/8 = 12.5%
• 2/8 = 25%
• 3/8 = 37.5%
• 4/8 = 50% (most important)
• 5/8 = 62.5%
• 6/8 = 75%
• 7/8 = 87.5%

Example: Gann Levels for a Stock (Illustrative)

SBI rises from Rs 600 to Rs 900. Range = Rs 300. One-eighth = Rs 37.50.

If SBI falls from Rs 900, the first supports are Rs 862.50 and Rs 825. The strongest support is Rs 750 (50%). If Rs 750 breaks, the next supports are Rs 712.50 and Rs 675.

The 50% Level: Centre of Gravity

Gann called the halfway point the most important resistance level. A stock that holds above the 50% level after a fall is still strong. A stock that breaks below it is weak.

How Long Stocks Hold at These Levels

Gann noted that stocks sometimes hold at a resistance level for 3 to 7 days, and sometimes for several weeks, before moving away.

Levels from Multiple Moves

Draw levels from several important moves. When levels from different moves fall at nearly the same price, that price becomes a very strong support or resistance zone.

Example: Nifty (Illustrative)

Nifty moved from 21,000 to 25,000. Range = 4,000. 50% = 23,000; 3/8 retracement from the top = 23,500; 5/8 = 22,500.

If a smaller earlier move gave a 50% level of 23,050, then 23,000 to 23,050 becomes a strong double support zone.

Use Levels on GoPocket

Calculate Gann levels for each stock in your GoPocket watchlist. When a stock falls to its 50% or 3/8 level and forms a bullish candle, place a Limit buy order near the level and a stop-loss just below it.

Frequently Asked Questions

Are Gann levels the same as Fibonacci?

They are similar ideas. Gann used eighths and thirds, while Fibonacci uses 38.2% and 61.8%. The 50% level is common to both.

Which range should I use?

The most recent important swing, plus major yearly highs and lows.

Key Takeaways

• Divide the range by 8 to find Gann levels.
• The 50% level is the strongest.
• Overlapping levels from different moves are very powerful.

Disclaimer: Illustrative prices only.