Bitcoin to target 55000
In the 12th century, one monk called Leonardo Fibonacci changed the history and all the modern trading strategies, by his theory of procreation among rabbits. He was observing them and found an elegantly simple numerical sequence that explained the rate of increase in their population.
The sequence starts with zero and one, and then adds the latest two numbers to get the next one – So zero plus one equals one, one plus one equal two, one plus two equal three, two plus three equal five, three plus five equal eight, and so on  This sequence can be used to describe an amazing variety of basic growth patterns of nature, from the distances of the planets from the Sun to the rings of a tree to the proportions of the human body to the branches of the Sneezewort Plant.
The Fibonacci Sequence is the series of numbers:
0, 1, 1, 2, 3, 5, 8, 13, 21, 34, …
The next number is found by adding up the two numbers before it:
- the 2 is found by adding the two numbers before it (1+1),
- the 3 is found by adding the two numbers before it (1+2),
- the 5 is (2+3),
- and so on!
Just why this simple sequence describes so many different processes of nature has been the subject of debate among philosophers and mathematicians alike for the past seven hundred years. Perhaps even more mysterious is how the same Fibonacci sequence also pops up, with astounding regularity, in the financial markets, Indeed there are many other sequences and formulas that traders use to tell them when to buy and when to sell, but none describe the market so universally, and none translate its chaos into clear meaning so simply and elegantly as the Fibonacci sequence.Â
Continuing the above-mentioned sequence, just as the ratio between two numbers is important so are the ratios between any three successive numbers and ay four successive numbers. Hence, the sequence is as follows: 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233, 377, 610 and so on, extending to infinity. Each number is approximately 1.618 times greater than the preceding number.
This value:1.618 is called Phi or the “Golden Ratio”. The Golden Ratio mysteriously appears frequently in the natural world, architecture, fine art, and biology. For example, the ratio has been observed in the Parthenon, in Leonardo da Vinci’s painting the Mona Lisa, sunflowers, rose petals, mollusk shells, tree branches, human faces, ancient Greek vases, and even the spiral galaxies of outer space.
0.618
The inverse of the golden ratio (1.618) is 0.618, which is also used extensively in Fibonacci trading.
Fibonacci levels used in trading
In the context of trading, the numbers used in Fibonacci retracements are not numbers in Fibonacci’s sequence; instead, they are derived from mathematical relationships between numbers in the sequence. The basis of the “golden” Fibonacci ratio of 61.8% comes from dividing a number in the Fibonacci series by the number that follows it.
For example, 89/144 = 0.6180. The 38.2% ratio is derived from dividing a number in the Fibonacci series by the number two places to the right. For example: 89/233 = 0.3819. The 23.6% ratio is derived from dividing a number in the Fibonacci series by the number three places to the right. For example: 89/377 = 0.2360.Â
In its recent uptrend, Bitcoin respected the pattern for an extreme trend continuation. From the W1 in march, it had almost 38.2% retrace before a new strong W2which also had 38.2% retrace before the existing W3. W3 as you can see in the Fibonacci spiral above and the weekly chart below is leading to 2.618 extensions (55000) from the Bitcoin historic low.Â
Fibonacci retracement levels are depicted by taking high and low points on a chart and marking the key Fibonacci ratios of 23.6%, 38.2%, and 61.8% horizontally to produce a grid. These horizontal lines are used to identify possible price reversal points.
The 50% retracement level is normally included in the grid of Fibonacci levels that can be drawn using charting software. While the 50% retracement level is not based on a Fibonacci number, it is widely viewed as an important potential reversal level, notably recognized in Dow Theory and also in the work of W.D. Gann
On a Weekly Bitcoin chart, we can see an uptrend that moves inside the spiral shown on a monthly chart breaking above the 1.618 (35500)Â from the low and reaching 2.618 (55000). A break above 35500 was the trigger for an extreme natural Fibonacci extension to 55000 where we expect resistance and correction.
When we compile this knowledge together and apply it to Bitcoin price action at the moment we can see that the target, as it is unknown using the traditional support and resistance, lies at 55000. Upside support is 42260.
We have used the combination of the top-down trading analysis to get these key levels explained in the charts. To learn more about the trading strategy we use register for education.
