How to Draw Fibonacci Extensions in a Downtrend

Just as Fibonacci extensions help buy-and-hold investors identify upside profit targets during a breakout, they also assist short-sellers in projecting downside targets during a bearish breakdown. When an asset drops below its previous support level into a downwave, extension levels calculate how far the selling momentum is likely to push the price before finding consolidation.

In this guide, we'll explain how to draw bearish extensions, detail key downside targets, and analyze risk rules.

📐 Bearish Projections: Coordinate Points

To project downside targets, you need three key price coordinate points from a bearish cycle:

1. Point A (The Swing High): The absolute peak where the bearish leg began.
2. Point B (The Swing Low): The bottom of the initial downward dump before a minor bounce.
3. Point C (The Retracement High): The peak of the relief rally bounce where buyers failed and selling resumed.

📊 Bearish Fibonacci Projections Infographic

Below is a technical layout illustrating price action dropping from a Swing High to a Swing Low, bouncing to a Retracement High, and breaking down toward downside extension targets:

📏 Step-by-Step Drawing Guide

In your charting software, select the Trend-Based Fibonacci Extension tool:

1. Click Point A: Select the wick peak of the major Swing High.
2. Click Point B: Drag down and click on the wick bottom of the Swing Low.
3. Click Point C: Drag back up and click on the peak of the Retracement High.

This projects Fibonacci percentage grids below the Retracement High, mapping target supports where sellers are likely to cover short positions.

🎯 Downside Target Levels

Monitor these extensions for potential reversal or take-profit targets:

• 1.000 (100% Extension): The downward breakout wave matches the exact price size of the first downwave.
• 1.272 (127.2% Extension): A common support target for short-term swing traders.
• 1.618 (161.8% Extension): The primary algorithmic target. Downtrends often find major buy support here.
• 2.000 (200% Extension): Marks a severe dump; indicates a deep capitulation phase.

To learn more about upside targets, read How to Draw Fibonacci Extensions for Upside Profit Targets. To set stop-losses, review Bear Market Retracements or calculate levels using the Fibonacci Calculator.