The purpose of this idea is not to demonstrate correct use of Fibonacci retracements levels. They would be created using a major peak and trough but I have not used the ATH as my peak which would be the obvious choice.
The purpose is to demonstrate the power of horizontal lines of support/resistance. This is probably the most fundamental ideas of TA - at certain price points buyers and/or sellers will be lined up to trade. Once a retracement or reversal has happened at a particular price point, there is a higher probability there will be support or resistance at the price in future. Further, if support is broken, there is a higher probability it will create resistance at that price in the future, and the reverse is true for breaking resistance.
The reason I wanted to publish is because I noticed something I disagreed with on the charts of the great MagicPoopCannon and wanted to offer a different perspective. I enjoy reading Poop's posts and really appreciate the time he puts into the community. However, with all respect to Poop, where I differ with his TA is the significance of sloped trendlines on linear scales. I believe they have no significance at all. On a typical forex currency chart, it may seem like they do because if you are looking at price movement from say, 106.0 and 107.0, the semi-log and linear scales look almost the same and so a sloped trend line is almost the same too. However, on a 4HR chart of Bitcoin from $5K to $19K, the linear and semi-log charts are nothing alike. A price movement from $5K to $10K is hugely significant, a 100% increase in price. A price movement from $10K to $15K is not as significant, price has risen 50%. But on a linear scale, these look like the same gains. Anyway, my personal opinion is that sloped trend lines on a linear scale of huge BTCUSD movements is not significant. You'll notice that on Poop's current charts the pink trend lines have had no significance at all since they were drawn in early January - the price passed right through them on both bottom and top. There's now a green trend line on there that does look like it had an effect but I'd argue that it was coincidence. This was already a clear level of support as you can see by looking across the chart. Again, no offence to Poop, just a different perspective.
However, linear scales are easily understood and of course there is no issue with using them for horizontal support/resistance lines because these lines hold on the semi-log charts too. So I started drawing in the most significant lines and then noticed a very nice fib pattern so I have fitted a fib pattern to the chart. Is this fib pattern significant? Maybe not, but it sure is pretty and the correlation with support/resistance lines is surprisingly good. Regardless, I think these levels will be significant because of their previous history as support/resistance. I would not be surprised to see a retracement around the 11700 level again for example. Anyway, if you find this idea helpful, check back in here in the future and see how these lines held up.
The purpose is to demonstrate the power of horizontal lines of support/resistance. This is probably the most fundamental ideas of TA - at certain price points buyers and/or sellers will be lined up to trade. Once a retracement or reversal has happened at a particular price point, there is a higher probability there will be support or resistance at the price in future. Further, if support is broken, there is a higher probability it will create resistance at that price in the future, and the reverse is true for breaking resistance.
The reason I wanted to publish is because I noticed something I disagreed with on the charts of the great MagicPoopCannon and wanted to offer a different perspective. I enjoy reading Poop's posts and really appreciate the time he puts into the community. However, with all respect to Poop, where I differ with his TA is the significance of sloped trendlines on linear scales. I believe they have no significance at all. On a typical forex currency chart, it may seem like they do because if you are looking at price movement from say, 106.0 and 107.0, the semi-log and linear scales look almost the same and so a sloped trend line is almost the same too. However, on a 4HR chart of Bitcoin from $5K to $19K, the linear and semi-log charts are nothing alike. A price movement from $5K to $10K is hugely significant, a 100% increase in price. A price movement from $10K to $15K is not as significant, price has risen 50%. But on a linear scale, these look like the same gains. Anyway, my personal opinion is that sloped trend lines on a linear scale of huge BTCUSD movements is not significant. You'll notice that on Poop's current charts the pink trend lines have had no significance at all since they were drawn in early January - the price passed right through them on both bottom and top. There's now a green trend line on there that does look like it had an effect but I'd argue that it was coincidence. This was already a clear level of support as you can see by looking across the chart. Again, no offence to Poop, just a different perspective.
However, linear scales are easily understood and of course there is no issue with using them for horizontal support/resistance lines because these lines hold on the semi-log charts too. So I started drawing in the most significant lines and then noticed a very nice fib pattern so I have fitted a fib pattern to the chart. Is this fib pattern significant? Maybe not, but it sure is pretty and the correlation with support/resistance lines is surprisingly good. Regardless, I think these levels will be significant because of their previous history as support/resistance. I would not be surprised to see a retracement around the 11700 level again for example. Anyway, if you find this idea helpful, check back in here in the future and see how these lines held up.
