Monthly Archives: December 2013

GC 240 min update

Subscribers to Coghlan Capital services are looking at numerous charts of different vehicles across various timeframes. Until now I have been showing one particular GC 240 chart but wanted to add another which is also showing good harmony with the all-important path of price.

Chart 1:

gc 240 chart 1

Chart 1 shows the coordinates of the pitchfork with the A being the swing high in late October. Note how the angle of the handle is very much in tune with the descending price even before we reach the B and C coordinates.

The validation of this fork came very quickly with the Upper Parallel touch in the first green circle and the decline to support at the Median Line.

The more detailed Chart 2 shows how price, having found support at the Median Line, rose first of all to slight resistance at the Quartile and then once more to anticipated resistance along the Upper Parallel.

Chart 2:

gc 240 chart 2

We only look to trade in the direction of the fork and because this is a downsloping fork we would only look to trade short. A short could have been taken by aggressive traders in the second green circle with a cash stop above the high of 1251.7. A more conservative short could have been taken in the area of the third green circle – short at 1247.6 with a stop above the previous high of 1251.7. If that opportunity had been missed the fourth green circle and a short at 1244 with a stop above the previous high of 1247.6 would have done the trick.

Price fell strongly away from the Upper Parallel and through potential first support of 1225.7 at the aforementioned Quartile. Because this move through potential support was so strong it is likely that the trade would not have been closed at this level, but would have been held in the hope of a move even lower. Price also moved strongly through the Median Line which would have been the next area of likely support – again the short would probably have been held in the hope of a continued move lower.

The third likely area of support was the lower Quartile, shown by the second red arrow, and this was where support was found and where at a price of 1186 the trade would have been exited.

Median Line Analysis using pitchforks is a methodology that allows us to predict areas or lines of support and resistance with extreme accuracy. It sounds simple, but the key to the analysis is correctly finding the path of price. By using the lines of the pitchfork and watching the strengthening and weakening of trend along these lines we are able to gauge the likely supports and resistances along this path of price.

Hopefully I have shown how the early identification of a pitchfork being in harmony with price would allow one or more profitable trades to be taken with very little risk to capital. In this case a 1244 short with a $4 stop could have led to a $58 profit in GC. By looking at different forks across different timeframes we are able to closely monitor the path of price and to correctly predict likely areas of support and resistance.

If you would like to find out more about our analysis and services, please follow the link:

https://www.coghlancapital.com/signup

GC 240 min update

In the last post I looked at how Median Line Analysis allowed us to very precisely follow the all-important path of price of Gold Futures at a time of extreme nervousness ahead of FOMC. By making good use of a proven line of resistance – the Upper Parallel – I showed how a short trade could have been taken with very little risk.

In Chart 1, by placing a stop above the first red arrow at 1268 a short could have been taken at the second red arrow at 1263. Support was anticipated in the blue circle along the line of the dashed Quartile (where there had previously been resistance) and the trade could have been closed at 1220 for a sizeable profit.

Chart 1:

GC 240 update Chart 1

I commented that resistance becoming support was bullish, but rather than make predictions about future price I am always intent on following what the charts have to say. As a trader I do not get “married” to a view and I will change my mind in an instant if the charts warrant it.

On this occasion price rose from support in the blue circle to the Upper Parallel once more. I was watching intently what happened as price could either reject again giving a further shorting opportunity, or it could have breached to the upside indicating a change of behaviour. Please remember that other timeframes can assist in coming to a determination of whether or not to take a trade….

If you look at the detail in Chart 2 you see that we have two 240 minute bars touching the line at the first blue arrow with a high of 1252. Aggressive traders could have taken a short here with a stop above that high but to me price had not yet shown whether it would reject or breach the line. Price did indeed reject with the second bar having a high of 1252 and a low of 1239 plus a close at the very bottom of the bar.

Chart 2:

GC 240 update Chart 2

This would be enough to tell me that the Upper Parallel was still resistance so when price approached it again I would be ready to short it once more. However if you look closely at what happened, price at the second blue arrow did not quite reach the Upper Parallel – it turned $2 beneath the anticipated level. So on a third approach at the third blue arrow I would expect similar, slightly lowered resistance. Price turned $1.50 from the red Upper Parallel so a trade could have been taken and filled the same$2 inside it at 1243 with a stop above prior high of 1248.

Price duly fell away from the anticipated resistance and we would have expected to close the trade once more at the Quartile (anticipated support) in the area of the green circle at about 1208. But on this occasion price fell strongly through the Quartile, so many traders would have kept the short open in expectation of a further move to the downside. Price has so far touched a low of 1186 – $57 lower than our extremely safe entry…. We now look to see if on a return to the Quartile it now provides resistance (which would be bearish) or if prices pushes through it to the upside and it becomes support once more (which would be bullish).

I hope that I have shown that Median Line Analysis utilising pitchforks is a methodology which not only allows supports and resistances to be accurately identified, but is one which allows safe trades to be taken even through the volatility of an event such as the news coming out of the FOMC.

If you would like to find out more about our analysis or services please follow the link:  https://www.coghlancapital.com/signup

GC 240 min

The gold market engenders responses and emotional reactions not seen in other markets. Some people are long time bulls and others are bears who see it as a “barbarous relic”. We prefer to look at the charts and determine what they are telling us.

Median Line Analysis using pitchforks is a methodology that allows us to predict areas or lines of support and resistance with extreme accuracy.  It sounds simple, but the key to the analysis is correctly finding the path of price. By using the lines of the pitchfork and watching the strengthening and weakening of trend along these lines we are able to gauge the likely supports and resistances along this path of price.

Chart 1:

GC 240 min chart 1

Chart 1 shows that from the late August high we used the significant swing low and the next significant swing high to draw our pitchfork and that it clearly defines this all-important path of price. We watched a line of support emerge along the Median Line of the fork as price declined through November. We also noted a line of resistance forming the top of a channel along the Quartile – the dashed red line.

Chart 2:

GC 240 min chart 2

Chart 2 shows the same fork in greater detail. When price breached the ceiling of the Quartile it moved to the Upper Parallel. The red arrows show the two exact touches on this line and where the market could have been efficiently shorted. Placing a stop above the first touch at 1268 would have provided a safe entry at the second touch at 1263. Price fell away from the Upper Parallel before finding support in the blue circle at 1220 along the Quartile.

If you look at a chart and you see prior horizontal resistance becoming support, you would consider that to be bullish. In the same way we look for that resistance to become support along the angle of the pitchfork. The Quartile resistance has become Quartile support in the blue circle, and as long as price stays above that line, we consider it to be bullish. What has happened is that in the line of the fork the level of support has stepped up from the Median Line to the Quartile.

However there is also a negative to be mindful of – support may have stepped up but resistance is also stepping down. In this case price turned back before it even reached resistance at the Upper Parallel and in terms of the fork we are looking at a lower high. Price only rose as far as a previous Sliding Parallel as shown by the dotted line between the two green circles. What we have done is create a narrower channel between support at the Quartile and resistance at this Sliding Parallel.

We have clearly defined the path of price as being along the lines of the pitchfork and we will continue to trade along these lines dependent on the strengthening and weakening of the trend.

If you wish to find out more about the methodologies we use or our analysis please follow this link:  https://www.coghlancapital.com/

AUDNZD 240

Another pair that the Cross Pair Analysis service has been following, and which shows the benefit of finding and tracking the path of price, is the AUDNZD 240. This fork is working extremely well and the series of declining highs along the red Sliding Parallels would provide numerous short entries.

AUDNZD 240 Chart

In particular, the “double taps” on these lines allowed shorts to be taken with tight stops and in the expectation of significant downside moves. As an example of this, the move from the second red circle at 1.1491 was from a two-bar double top and the current low is 1.0808. It is worth clicking on the chart to see in close-up how precise the touches are……

We are currently watching to see if structure (and evidence of support) forms at the Lower Quartile – if it does, and price starts to move up we will look at whether the next Sliding Parallel above, that was prior support, now becomes resistance.

To find out more about the Cross Pair Analysis service please follow this link:

https://www.coghlancapital.com/cross-pair-forex-charts-analysis

EURCAD 240 min follow up

Following on from my previous analysis of this pair and having found the all-important path of price and delineated it with the pitchfork I have been asked how we would trade it. Subscribers to the Cross Pair Analysis service receive daily videos highlighting such opportunities.

We only look to trade in the direction of the fork and we seek out low risk, high probability trades. One of the first of these would be apparent soon after the confirming touch on the Lower Parallel. As with most analysis we consider that an area where resistance is breached and then becomes support to be bullish. This happens along the line of the quartile (the lower hashed line) and is shown by the red arrows. A long could have been taken when this became apparent.

EURCAD 240 min chart

But we do not just follow the “standard” lines of the pitchfork – remember that it is the path of price that is important. So when we saw a similar pattern along a Sliding Parallel we would look to trade long once more.

The Sliding Parallel that was resistance (red circles) and that then became support (green circles) was pointed out. This bullish set-up would have allowed a long trade to be taken in a number of places eg at the low of the last bar in the third green circle at 1.4381 with a stop as close as ten points. This could have been ridden all the way to the blue circled Sliding Parallel where the second circle is at 1.4640. The trade therefore would have been closed at confirmed prior resistance.

By using established lines of support and resistance, Median Line Analysis allows us to trade using small stops with great confidence. The volatility in the non US Dollar pairs gives particular scope for large moves.

To find out more please visit:

https://www.coghlancapital.com/cross-pair-forex-charts-analysis

EURCAD 240 min

The benefits of an uncluttered and clean chart are obvious. Every so often I completely clear my charts and start from scratch to see what I can find.

On doing this recently to the EURCAD 240 min, I very soon noticed the path of price in Chart 1 from bottom left to top right and also the three low-high-low points circled in red.

Chart 1:

EURCAD 240 min chart 1

We are “pattern seeking mammals” and by joining the three points with a pitchfork, as shown in Chart 2, I was able to properly delineate the path of price. By adding these lines the whole nature of the move becomes much clearer and allows us to follow the strengthening and weakening of the trend within the fork.

EURCAD 240 min chart 2

Initial validation of this path of price came from the sequence of touches on the handle of the pitchfork near the A. This very quickly showed that the line of the fork was indeed in harmony with how price was moving. Further validation came with the series of bars of resistance at the Lower Quartile and then by the exact touch of and V-shaped rejection from the Lower Parallel. The more exact the touch and the stronger the rejection, the more we are likely to consider the fork to be properly validated.

Another thing to notice is how the Sliding Parallel that once was resistance (red circles) has since become support (green circles). This was a clear sign that price was likely to move higher in the fork. Note also how price was finding resistance at the Median Line and how this too has now become support. These lines allow us to look to trade long (following the direction of the fork) and to do so with considerable certainty given the prior action along the line. The gradient of the fork allows us to place stops, reasonably tightly, beneath prior lows.

To find out more about the Cross Pair Analysis service please follow this link:

https://www.coghlancapital.com/cross-pair-forex-charts-analysis

GBPAUD 60/240 min

The recent very strong trending move that we saw in GBPAUD is best looked at across timescales. We use the movement of price within a fork to tell us if trend is strengthening or weakening, and use the path of price that this gives us to look for potential trades.

Chart 1:

GBPAUD 60 min chart

One such trade was made possible by the GBPAUD 60 minute fork shown in Chart 1. Subscribers to the Cross Pair Analysis service had been watching this for some days before we saw price double dip to the green circles along the outer quartile. Because we had seen prior support on this proven line, subscribers could have gone long at 1.7067 at the second touch and placed a stop beneath the first touch at about 1.7050. This is shown in close up in Chart 2.

Chart 2:

GBPAUD 60 min chart 2

Price moved strongly higher and has so far reached a price of 1.8060 on 28th November as shown in the red circle. Very obviously price has moved a long way out of the 60min fork, so how would somebody know that this high was a good place to take profit or to tighten stops?

Chart 3:

GBPAUD 240 min chart

The answer comes from looking across timeframes and Chart 3 shows a different fork on a 240 min timescale. It is an unmodified Schiff from the March lows and the touch on the Upper Parallel in the red circle mirrors the red circle in the 60 min timeframe.

Median Line Analysis using pitchforks is a methodology that allows us to predict areas or lines of support and resistance with extreme accuracy. By looking across timeframes one would be able to find a very satisfactory entry and to predict a likely high, thereby providing a trade of nearly 1000 points in ten days.

To find out more about the Cross Pair Service please follow this link:

https://www.coghlancapital.com/cross-pair-forex-charts-analysis

GBPNZD 240 min

gbpnzd 240 minute chart

Subscribers to the Cross Pair Service started watching the blue fork once price began to breach the resistance of the red fork. We used the fork to monitor the potential change of behaviour we were seeing and to follow the strengthening or weakening of this trend.

Although initially the path of price in the blue fork was somewhat scrappy we became happier that we had defined this path once Median Line resistance and Lower Parallel support had shown themselves. We don’t demand that price must stay within the boundaries of the fork; instead we are looking for it to move along in the angle of the fork. Indeed by watching price move beneath the Lower Parallel to the dotted Sliding Parallel, a long entry in the green circle could have led to a significant trade.

Price moved from the Sliding Parallel (green circle) to the Upper Quartile (red circle) – a move of over 1000 points between the 19th and the 29th of November.

Should you wish to find out more about the methodology or about the Cross Pair Service you may be interested in the following recording of a webinar given on 20th November:

http://www.coghlancapital.com/node/7340