Monthly Archives: January 2014

Following the Pitchfork – GBPNZD 20 min

When the GBPNZD 20 min price started to edge above previous highs I started to note a possible change in trend or behaviour and looked to track this by means of a pitchfork.

Chart 1 shows how I tried to do this by initially identifying three swing lows and highs – marked A,B and C – with which to anchor my pitchfork. Having drawn it I then started to look for confirmation that I was indeed defining or following the path of price by means of this fork. I look for how price moves along the fork and whether it repeatedly touches lines drawn along this angle.

Chart 1:

GBPNZD 20 min Following the Pitchfork

In this instance the red circles show a sloppy response at the Lower Parallel and the Median Line and even though price tracks along the Lower Parallel for a couple of days, the touches were not precise enough to enamour the fork to me. It was therefore not a surprise when price dipped beneath the Lower Parallel and moved away from the line of the fork at the red arrow.

I therefore adjusted the fork, using the same three pivots, to a Modified Schiff as shown in Chart 2. In such a pitchfork the A is moved 50% towards the B in terms of price and time. Using this fork it can be seen that the reactions of price to the lines drawn was much more precise – the red circles show exact touches on the Upper and Lower Parallels and gave me confidence that the fork was indeed defining the correct path of price.

Chart 2:

GBPNZD 20 min Following the Pitchfork 2

Having established this confidence it would then be possible to look to the pitchfork to provide high-probability, low-risk trades in the vehicle. One such trade would have been to get long at the double-tap on the Lower Parallel as shown in the green circle. A long taken at the second touch at 1.9995 could have been protected with a 10 point stop beneath the low of the first touch. The stop would have been moved to breakeven as price moved away from the entry,

As price pushed above the Median Line it spiked higher and fell back – we would take note of this move and draw a dotted Sliding Parallel from previous resistance to mark this. This Sliding Parallel could only have been drawn after a second reaction to it as before that there would be no evidence that it existed. Having drawn it, the long trade could have been closed on a return to the Sliding Parallel resistance at the red arrow in the region of 2.0280.

By adjusting the pitchfork when needed we were able to correctly define the path of price and to use the lines of the fork to take a low-risk, high probability trade – I will continue to monitor the pitchfork and look for additional trades….

Addendum: Since posting the above, there has been a very good example of the way that we can use the proven supports and resistances given by the pitchfork to enter a profitable trade. Chart 3 shows an entry along proven support at the third green circled Quartile touch at 2.0170 with a ten point stop which could have been closed at the blue circle along confirmed Sliding Parallel resistance at 2.0325.

Chart 3:

gn20 2

If you would like to find out more about our analysis or services please follow the link:
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The following link will take you to a recent webinar looking at non-dollar pairs:
http://www.coghlancapital.com/node/7723

As Above, So Below – AUDNZD 60 min

I have been following this AUDNZD 60 min chart for some time – it shows a Modified Schiff pitchfork (where the origin is moved 50% in both time and price from the A towards the B) and dates from Early December. What I am looking for is some sort of indication that the fork is valid ie that we have correctly defined the all-important path of price.

asabovesobelow AUDNZD 60

Initially things did not look too promising as price meandered above the line of the Upper Parallel before spiking and retracing much of the move. It was only when there was a precise double-tap on the Median Line (in the second blue circle) that I started to get interested. The fork was still not validated as the touch could have been a coincidence but I drew a Sliding Parallel from the spike high in the first blue circle and watched to see what happened. When price meandered once more above the Upper Parallel and then spiked to resistance at the very same Sliding Parallel in the third blue circle I was happy to say that the fork was validated.

Very aggressive traders could have taken a short on a second touch of this Sliding Parallel at 1.0859 with a stop behind the first touch above 1.0862. This could then have been exited at prior support at the Median Line at 1.0709.

Price continued to fall and the Median Line that had been support became resistance – or to be precise the green Sliding Parallel just above the Median Line became resistance. This crossover from support to resistance also shows the path of price “stepping down” – from running in a channel between the Sliding Parallel resistance and the Median Line support it stepped down so that a new channel formed with the Median Line becoming resistance and another parallel line became the support.

And this support was found along the Sliding Parallel, marked with green circles, just beneath the Lower Parallel. Price has since moved between this Sliding Parallel support and the Sliding Parallel resistance noted above. Consistent moves are ones which can be traded eg a short at the green Sliding Parallel could have been taken today at 1.0644 with a stop behind the previous high of 1.0649. Price has dropped away from this entry and stop would have been moved to breakeven.

One other thing of note in this pitchfork is the “equivalence” or balance to be found around the Median Line. Note how the distance between the Upper Parallel and the blue circled Sliding Parallel is virtually identical to that between the Lower Parallel and the green circled Sliding Parallel.

I will continue to watch as this pitchfork shows the weakening and strengthening of trend along the defined path of price…..

If you would like to find out more about our analysis or services please follow the link:
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The following link will take you to a recent webinar looking at non-dollar pairs:
http://www.coghlancapital.com/node/7723

Starting Again From Scratch – GBPCHF 60 min

I have written before about how I look for simplicity on a chart. When there are too many lines or when price starts to move less precisely along the existing lines I like to wipe the chart and start again. This is what recently happened with the GBPCHF 60 minute chart shown here.

Chart 1:

gbpchf-chart1

When looking at an unmarked chart I first look for the general trend and then look for three significant alternating swing lows and highs (or highs and lows in a downfork). In this case from Chart 1 it is obvious that price is moving from bottom left to top right, therefore upsloping and therefore we are looking for a swing low, a swing high and another swing low – here the obvious ones are labelled A,B and C.

Chart 2:

gbpchf2-chart2

Chart 2 shows my first attempt at drawing a pitchfork – in this case a standard Andrews’ fork. Here we use the ABC shown above to give us the pivots for the fork and as usual start to look whether price is moving along the lines generated in order to validate the pitchfork. One further useful piece of information is the red circled touch on the handle of the pitchfork which is an early indicator that we might indeed be defining the path of price,

However, in this instance, it quickly becomes clear that price is not moving according to plan, with price falling below the Lower Parallel almost immediately. This would lead me to consider other pitchforks, namely a Modified Schiff or a plain (or Unmodified) Schiff. Before looking at one of these variations, it is worth noting that with the Andrews fork in Chart 2 price soon returned into the body of the pitchfork and we were able to follow its moves within the lines so defined. I suppose this is what you could term “Close, but no cigar….”

Chart 3:

gbpchf60-chart3

Switching to Chart 3 which shows a Modified Schiff pitchfork – where the point of origin is moved halfway from the A to the B both in terms of price and time – one can clearly see that this pitchfork defines the all-important path of price much better. There is immediate validation of the fork from the Median Line touch in the first red circle, followed by even more validation at the Lower Parallel in the second red circle. (Very aggressive traders – emboldened by the Median Line validation – might have taken a long trade at this Lower Parallel on the second touch at 1.4773 with a stop below the low of the first touch at 1.4769)

Price rose strongly from here and pushed above the prior resistance of the Median Line before falling back to the level shown by the second red arrow. This was support along a Sliding Parallel that had previously provided resistance as shown by the first red arrow. As is the case on the horizontal, when resistance becomes support, it is deemed to be bullish; it is the same looking at resistance becoming support in the line of the fork. So longs taken at the second red arrow on the second touch at 1.4925 could have seen a close stop of a couple of pips beneath prior support at the first touch.

Note how we do not just jump into a trade on the first touch of a line but we wait for support to establish itself along this line and provide a close prior low under which to place our stop.

Once again price rose from here to the next resistance which was found along the blue Sliding Parallel drawn from the spikes near the BC axis. When price fell back once more, having seen support step up from the Lower Parallel to the arrowed Sliding Parallel we were anticipating a possible higher line of support and indeed found it along the Median Line as shown in the green circles. Once this support had established itself, a further long could have been taken from the Median Line in the region of 1.4986 and this would currently be well in profit as price has pushed up as far as 1.5110.

I hope that I have shown the benefits of starting afresh when the need arises. Median Line Analysis using pitchforks allows us to precisely define the path of price and to predict likely lines or areas of support or resistance with great accuracy

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

The following link will take you to a recent webinar looking at non-dollar pairs:
http://www.coghlancapital.com/node/7723

Up Moves and Downforks – GBPAUD 60 mins

I think I have mentioned before that I will only trade long in an upfork and short in a downfork. The reasons for this are twofold: firstly, in order to maximise my target and secondly, to enable a safe stop to be utilised – beneath a prior low in an upfork and above a prior high in a downfork.

However, following on from the previous analysis of the dip to support of the GBPAUD 60 mins I wanted to show how we can use a downfork to help us follow a move to the upside. 

I hope that I have previously shown that pitchforks can be used to track the strengthening and weakening of price along an established trend. We can even use a downfork to track this trend if price is moving strongly higher. An example of this occurred in the vehicle that we have been following, namely the GBPAUD 60 min.

Chart 1:

GBPAUD 60 min Chart 1

In the current example as shown in Chart 1 we watched price fall to and find support at the previously validated Lower Parallel of the blue fork. When I drew the red downfork I did not have any such validation – it was only when price found support at the red Lower Parallel that I started to consider the now validated fork as a means to help track the vehicle in conjunction with the blue upfork.

We watched price move higher from a low of 1.8011 and noted how it found resistance at the red Upper Parallel (as shown in the first purple circle) at about 1.8465. Price retraced some 160 points before finding support at the 1.8303 level in the second purple circle. Note how this latter level was the conjunction of the red Quartile and the blue Upper Parallel and provided sufficient support and propulsion to set price on its way towards its current high of 1.8751. Without the anticipated resistance of the red fork’s Upper Parallel we would not have found a valid reason for the retracement – as it was we were prepared for this and it would have helped us draw the formation that you can see in Chart 2.

Chart 2:

GBPAUD 60 min Chart 2

This shows one of the simplest of all formations – the AB line being equal in length to the CD line. With the help of the red pitchfork we would not have been ready to draw this formation – this is because the structure of the move was made apparent by the pitchfork. We use the ABCD to provide a likely target or area of retracement. By noting any action along the P line – the line midway along the CD leg – we are able to prepare for any D reaction. In simple terms the more exact the touches on the P line from above or beneath, and the greater the reaction from the P after these touches then the greater the commensurate reaction from the D. The formation has worked very well indeed – you can see how price moved sideways along the P line, finding support on it before moving strongly higher. It reached a high of 1.8751, just 5 points away from the D target of 1.8756.

By utilising various strategies of Median Line Analysis together with a very simple ABCD formation we were able to follow price as it moved approximately 750 points higher in under a week.

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

The following link will take you to a recent webinar looking at non-dollar pairs:
http://www.coghlancapital.com/node/7723

GBPAUD 60 min – Pitchforks continue to work

I have written a number of times about the importance of the path of price and how it does not matter if price is moving within or without the confines of the fork so long as we are able to correctly describe this path.

A good example of this occurred recently in the GBPAUD 60 that we had been following for some time – I am showing it here in Chart 1 as a 240 min chart with much of the annotation and detail removed for clarity. The narrowness of the pitchfork would lead many to discard it once price moved outside of its Upper or Lower Parallels. However I felt that the fork was doing its job, in that the peaks and troughs of price – the resistances and supports – were all in a line defined by the pitchfork itself. For example the outside Quartile lows in early November followed the line of the fork and price rose from the 1.70 area to 1.87 by early January.

Chart 1:

GBPAUD 60 min Chart 1

I am not showing all the interim moves, but we tracked this vehicle almost every day and members had the opportunity to take profitable long trades as a result of this continuing analysis. We became aware of a potential change of behaviour once price stepped down to a lower Sliding Parallel – albeit from a new horizontal high – as shown in the green circle.

We followed the move down via another fork – again not shown – and watched as, despite not interacting with it since mid-November, support materialised once more precisely at the Lower Parallel of the fork as shown in the red circle. Members were made aware of this via the chat facility on our website.

Moving to Chart 2 which is the same pitchfork, but on a 60 minute timeframe, you can see the detail of what occurred. Looking closely one can see that after rapidly falling nearly seven hundred points, price did indeed dip under the Lower Parallel by ten points or so before rebounding to the upside. Think of it as though it were a trampoline – as the Lower Parallel needed a little bit of leeway to absorb the energy of the fall. But we noted at the first red arrow how price rebounded to the upside alerting us to this line still being active support.

Chart 2:

GBPAUD 60 min Chart 2

Accordingly on a second approach – as shown at the second red arrow – the double tap would have allowed a long to have been entered and a stop could have been placed either under the low of the first of the two bars or more conservatively beneath the spike low at the first arrow. An entry in the region of 1.8035 would currently have seen a high of 1.8465 and needed at most a 25 point stop.

I hope I have shown that Median Line Analysis using pitchforks allows us to predict likely lines or areas of support or resistance with great accuracy – without such analysis I do not believe that we would have been able to anticipate and act on this recent move.

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

The following link will take you to a recent webinar looking at non-dollar pairs:
http://www.coghlancapital.com/node/7723

EURCAD 60 min

When looking to trade I will only go short in a downtrending fork and long in an uptrending one – this is partly because of risk/reward but mainly in order to ensure that I have a solid nearby stop should things move against me. However we can use a downtrending fork to track a move to the upside by watching the strengthening and weakening of trend in the fork.

Chart 1:

ec60 chart 1

This recent example shown in Chart 1 is provided by the EURCAD 60 minute. I had been following the movement of price to the upside via the blue fork and in late December noted that price was running into Sliding Parallel resistance in the green circle. Prior (and later) resistance along this dotted blue line is shown by the red circles.

When price started to fall I drew the red fork to the downside. Chart 2 shows this fork in more detail.

Chart 2:

ec60 chart 2

I was anticipating support to be found in the area of the Lower Parallel of the blue fork, and the red fork was most useful in giving me context. As we approached the Lower Parallel of the red fork I noticed a series of lows forming in the line of the fork – just above this Lower Parallel – shown by the three red arrows and the dotted red line. Remember that it is the path of price that we are always looking to determine.

This context from the red fork – together with the blue Sliding Parallel support allowed a very safe long to be taken in the line of the blue fork as detailed in last Tuesday’s Webinar, the link to which is below. Price moved strongly higher and we found anticipated resistance in the purple circle at the conjunction of a blue Sliding Parallel and the red Upper Parallel. This was a move from 1.4410 to 1.4430. Price then retraced 100 pips or so from this anticipated resistance to the second purple circle at the conjunction of another blue Sliding Parallel and the red Quartile.

This stepping up of support not surprisingly led to a move above the red Upper Parallel. When price retraced once more into the red fork, it bottomed at the second red arrow – this was along a Sliding Parallel (marked in green) where prior resistance at the first red arrow now became support. On the horizontal when resistance becomes support the implication is bullish – it’s exactly the same when it happens in the line of the fork.

Price accordingly has moved higher once more and can be seen in Chart 1 to have found resistance once more along the same blue Sliding Parallel in the third red circle at 1.4950.

Hopefully I have shown that following the strengthening and weakening of price in a downfork can even help to track it when it is moving to the upside.

I have looked in detail at this vehicle as well as a number of others in the webinar from Tuesday linked below:

http://www.coghlancapital.com/node/7723

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

https://www.coghlancapital.com/signup

NZDCAD 60 min continued

Following on from my last post about this pair I wanted to continue by looking at what happened over the next few hours. I was already confident that the pitchfork was in harmony with the path of price given the initial resistance at the Median Line followed by the precise rejection of the Upper Parallel in the red circle.

nzdcad 60

When price returned to the Median Line at the first red arrow I was watching closely to see evidence of this line – which had previously been resistance – providing support. As with prices on the horizontal, if resistance is seen to be becoming support that is looked on as a bullish sign. After a couple of 60 min bars had shown the support of this Median Line, a long trade could have been taken on a return to that line at about 0.8760 with a stop below the prior low of the first bar at about 0.8755. The target for this trade was prior resistance at the Upper Parallel at 0.8640 – which it reached in the green circle.

Price then moved lower from the Upper Parallel resistance (also the midway P of an AB=CD formation) and found support along the Quartile at the second red arrow. Having printed several more bars of support it was clear that the “floor” of this vehicle’s move had stepped up from the Median Line to the Quartile. A further long could have been taken here at about 0.8815 with a stoploss beneath prior support at 0.8805.

Given that the floor had stepped up it was reasonable to expect that the “ceiling” or resistance would do the same. Consequently it was not a surprise when the Upper Parallel did not provide any continued resistance. Instead we used the AB+CD pattern to provide a clear target at the D level of 0.8930

Hopefully this shows how an early recognition of the correct path of price and using a pitchfork to define it, allowed two trades to net approximately 200 points profit whilst using a minimal stoploss of about 10 points in each case.

I have looked in detail at this vehicle as well as a number of others in the webinar from Tuesday linked below:

http://www.coghlancapital.com/node/7723

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

NZDCAD 60 min

I received an email asking if I had any thoughts about the NZDCAD in the shorter term so decided to look at it via the 60 min timeframe. Because of the volatility in the non-dollar pairs this is usually the shortest timeframe that I am happy to chart.

nzdcad 60 chart

Looking at the NZDCAD 60 min chart one immediately notices that the price has basically moved sideways for the last couple of weeks. However by using pitchforks to define the all-important path of price we become aware of a definite change of trend as price transitions from the red downfork to the blue upfork.

Support in the red fork stepped up from the Median Line to the Quartile – when support steps up, resistance tends to do the same – so it was not a surprise to see the Upper Parallel (potential resistance) breach. What got my attention was the continuation of this stepping up of support – and to note it establishing itself on top of this Upper Parallel (as shown in the green circles).

This change of behaviour led me to draw the blue fork to the upside using the very distinct pivots marked A,B and C. The next thing to do is to use the movement of price in the new fork to validate it. Remember that what we are trying to do is to find the correct path of price. The arrowed touch at the Upper Parallel followed by the arrowed series of bars at the Median Line certainly help to do so and I will continue to track the strengthening and weakening of trend in the pitchfork.

It should also be noted that a the new blue fork would have allowed a very safe long taken to have been taken at 0.8760 when the second or third bar was noted to have found support on the Median Line – with a stop below the first bar at 0.8755. This would now be well in profit with the stop moved above the breakeven.

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

I have shown this downfork a number of times and spoken about making use of it to short the market. But we are also watching the pitchfork to gauge the weakening or strengthening of trend along it. Following on from previous articles I want to look at the clues which told us that the line of resistance provided since early December by the Upper Parallel was under threat.

gc 240 chart

We use the pitchfork to gauge the trend along the path of price – whether it is strengthening or weakening. On the horizontal, when you see support rising (higher lows) you consider that resistance will be put under pressure and that you may see it rising too. It is exactly the same in Median Line Analysis except that we are looking at rising support along the line of the fork.

In the chart you can see that for most of November price ran along a channel defined by the Median Line as support and the Quartile as resistance. In early December the highs started spiking above this Quartile and support stepped up from the Median Line to a higher Sliding Parallel (letter A). Resistance stepped up too, and the Upper Parallel (red circles) became the line of resistance.

A new channel was forming higher in the fork and when price fell, it found support at the Quartile – resistance becoming support is bullish whether on the horizontal or along the line of a pitchfork. When price dipped through the Quartile it found support along another Sliding Parallel (letter B). The fact that letter B was higher in the pitchfork than letter A was again bullish. Price was stepping up and it did so once again when it found support once more along the Quartile. This was confirmed at letter C where support was maintained along the Quartile despite the strong spike down. The fact that there was a strong move through the Upper Parallel by the arrowed bar shows a solid breach of the prior resistance.

The move to the upside could have been traded using shorter timeframes – subscribers are privy to them – with confirmation of the likelihood of this move coming from the action that I have described in this 240 min chart.

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