What Is Fibonacci Extension?
Fibonacci extensions project potential price targets beyond the prior price range using Fibonacci ratios — 127.2%, 161.8%, 200%, 261.8%, and 423.6%. While Fibonacci retracements identify pullback zones within a range, extensions identify where price might travel after breaking out of that range.
How Fibonacci Extension Works
To draw Fibonacci extensions, you plot from a swing low to a swing high and then back to a retracement low (for bullish extensions). The extension levels project above the prior high. In Elliott Wave analysis, Wave 3 commonly extends to 161.8% of Wave 1, and Wave 5 often targets 100% of Wave 1. These ratios appear with remarkable frequency in crypto price action.
Why It Matters for Traders
Fibonacci extensions are the primary tool for setting profit targets in trending markets where no prior resistance exists (like new all-time highs). When Bitcoin breaks its ATH, there's no historical resistance — Fibonacci extensions from the prior swing provide the only mathematical framework for projecting targets. The 161.8% and 261.8% levels are particularly reliable in crypto.
