According to Jeff Greenblatt in his book "Breakthrough Strategies for Predicting Any Market", Fibonacci and Lucas sequences are observed repeated in the bar counts from local highs/lows. They occur from high to high, low to high, high to low, or low to high. Essentially, this phenomenon is observed repeatedly from any on any time frame. Greenblatt combines this observation with to predict the price and time reversals. However, I am no Elliottician so it was not easy for me to use this in a practical manner. I decided to only use the bar count projections and ignore the price. I projected a subset of Fibonacci and Lucas sequences along with the Fibonacci ratios from each . As expected, a projection from each resulted in a large set of plotted data and looks like a huge gong show of lines. Surprisingly, I did notice clusters and have observed those clusters to be fairly accurate.
- Fibonacci Sequence: 1, 2, 3, 5, 8, 13, 21, 34...
- Lucas Sequence: 2, 1, 3, 4, 7, 11, 18, 29, 47...
- Fibonacci Ratios (converted to whole numbers): 23, 38, 50, 61, 78, 127, 161...
Light Bulb Moment
My eyes may suck at grouping the lines together but what about clustering algorithms? I chose to use a gimped version of Mean Shift because it doesn't require me to know in advance how many lines to expect like K-Means. Mean shift is computationally expensive and with Pinescript's 500ms timeout, I had to make due without the KDE. In other words, I skipped the weighting part but I may try to incorporate it in the future. The code is from Harrison Kinsley. He's a fantastic teacher!
- Search Radius: how far apart should the bars be before they are excluded from the cluster? Try to stick with a figure between 1-5. Too large a figure will give meaningless results.
- Offset: looks left and right X number of bars for a . Same setting as the default TradingView high/low script.
- Show Lines Back: show historical predicted lines. (These can change)
- Use this script in conjunction with Fibonacci price retracement/extension levels and/or other levels. If it's no where near a and there's a projected time coming up, it's probably a fake out.
In true TradingView spirit, the author of this script has published it open-source, so traders can understand and verify it. Cheers to the author! You may use it for free, but reuse of this code in a publication is governed by House Rules. You can favorite it to use it on a chart.