I have looked at this vehicle in a previous article and discussed how it could be followed and traded using the methodology of Median Line Analysis. What we look to do at an early stage of a trend is to seek out and define the path of price of a pair and, having done that, use the lines of support and resistance that soon become apparent.
Chart 1 is a copy of the one I discussed in early May. We had quickly established this all-important path of price as the CADCHF moved above and away from the declining red lines of resistance. We used the distinct A, B and C pivots to draw our pitchfork and looked to validate it, ie to see if there was any price action along the angle of the lines that we had drawn in order to show that we were indeed tracking the path of price. The Upper Parallel resistance, the Median Line resistance and the puce Sliding Parallel support all confirmed this and we noted how a trade from this last line would have been low-risk and high-probability. Resistance was seen at the green horizontal from the early April spike high.
Let’s take a look at Chart 2 and see what has developed since then. After the rise from 0.7987 in the fourth green circle to the horizontal at 0.8160 we saw a small retracement. It is apparent from the action along the Median Line of the pitchfork how important this line has been in providing support and resistance since the first red arrow at the beginning of April. I have highlighted other instances of this with more red arrows. You can clearly see that after the green horizontal touch price fell back and found support along this Median Line. We noted this prior line of resistance was becoming support – a bullish indicator in the same way as it would be if we were looking at lines on the horizontal. The stepping up of support from the puce Sliding Parallel to the Median Line indicated a strengthening of trend along the angle of the fork and it was no surprise when price pushed higher and broke through the horizontal green resistance.
Respecting the supports and resistance along the path that we had drawn we encountered a pause precisely where anticipated – along the Sliding Parallel from the late March high originally to be found as a blue dotted line in Chart 1 – changed to a puce line in Chart 2 so that it is more apparent. Once more we see a retracement from anticipated resistance in the puce circle and we note how the vehicle falls back before finding support along the green horizontal. Again resistance becoming support is bullish and we watch another move higher before once again encountering resistance at the same Sliding Parallel in the second puce circle.
I will continue to monitor and trade this chart using the lines of support and resistance that Median Line Analysis has allowed me to identify. If price pushes through the current Sliding Parallel resistance I will look to the Upper Parallel as the next likely line of resistance – it acted as such in early April. Obviously if the puce Sliding Parallel was breached and then in turn became support, that would be further bullish action. However, if price moves lower I will look for continued support along the green horizontal and, beneath that, along he Median Line of the fork. We are tracking the strengthening and weakening of trend along the path of price that we have identified.
The Cross Pair Analysis service uses Median Line Analysis to cover a dozen non-US Dollar pairs on a daily basis, looking at context via Weekly and Daily charts and in detail via 240, 60 and, sometimes, 20 minute ones.
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