Finding Fibonacci Floors

How low can we go? In this piece, we use a combination of Fibonacci levels, and onchain price models to look at where deep corrections found their floor in past cycles.

G’day Folks,

After switching analysis gears last week, the next natural step is to start looking for areas where we might expect investor behaviour to strengthen on the demand side. I am a firm believer that markets which eventually want to go higher, must oftentimes go lower to load up enough potential energy for the move.

Bullish corrections need to be deep enough, and long enough to shake out the bulls who didn’t really want to see the end of the movie. It also stokes the confidence of the bears to layer in larger ‘I’m a genius’ level shorts…which are ripe for a squeeze.

In many ways, markets adhere to the laws of gravity, and they cannot trend in one direction without taking regular breaks. This is also why analysis time-frames matter so much, and a great many amateur investors lose money because they get this distinction wrong. They expect long term trends to play out in the next hourly candle.

• The Monthly Uptrend is in charge, and its momentum can typically be assumed to continue. The monthly chart does turn around very slowly, similar to an aircraft carrier which has a long, slow turning arc, but it is largely immune to the impact of big waves.

• Corrections will occur on the Daily to Weekly time-frames, and reversals from a bull into a bear will start small, and propagate higher. These time-frames are like speedboats, which can turn around very quickly, but also get chopped around in rougher seas.

In this edition, I will explore how I am thinking about the current Bitcoin market as a weekly scale correction, within the context of a monthly scale uptrend.

I will also combine key onchain pricing models I monitor during corrections with the classic technical Fibonacci retracement levels. These often speak the same language, and provide a degree of confluence for where local floors may be found.

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