I have received an email asking if I would have a look at the AUDCAD 20 minute chart – one of the pairs that we cover in the Cross Pairs Analysis service – and I am happy to do so. The bigger picture shows that the vehicle has been moving to the upside but is in an area on both the Weekly and Daily charts where we might anticipate some resistance.
By taking it down to the 20 minutes as shown in Chart 1 we can see the effect of this potential resistance in a shorter timeframe. In Median Line Analysis we are looking to establish the path of price and to then track by means of the parallel lines of a pitchfork. Finding this path at an early stage is obviously advantageous so we try to validate the angle that we are following as quickly as possible. We do this by watching to see if price is acting and reacting to the lines we have drawn – here that is clearly the case as can be seen from the series of red circles. They show a line of support establishing itself along the dashed lower Quartile and a line of resistance forming along the line of the upper Quartile.
Once we are happy that we have defined the all-important path of price we then look to see if the trend is strengthening or weakening along this channel or, more precisely, this series of channels. In this case the trend weakened from resistance at the last red circle and support did not show itself until the Sliding Parallel marked by the first red arrow. Note how I am not concerned by the fact that this is outside the main lines of the fork – all I am watching is the angle of ascent.
If we follow price forward we see that support has “stepped up” from the Sliding Parallel to the Outer Quartile – the second red arrow. A strong bar from here initially finds resistance at the Median Line before topping out once more in the first green circle at the prior resistance of the upper Quartile.
Twice more price falls to the support marked with red arrows along the outer Quartile – support is constant in the line of the fork. However the resistance that I mentioned at the start of this article is apparent in the lowering of resistance in terms of the fork as shown by the series of green circles. From the upper Quartile it has lowered to the Median Line and from there to the Lower Quartile. As happens on the horizontal, when we see resistance lowering we are aware of the possibility of support lowering too.
To date support has been constant along the outer Quartile but the lowering of resistance makes me somewhat wary. Price seems to be currently finding some difficulty getting above the Lower Parallel of the fork, and if this continues it will be a further lowering of the resistance that we have noted. I will watch to see if this indeed occurs as well as monitoring the noted support. If price should push above the Lower Parallel I will look to see if it can at least reach the prior resistance of the lower Quartile as shown in the last green circle.
I hope that I have shown how we monitor the strengthening and weakening of trend along the pitchfork – how the same principles that are used on the horizontal can be used along the angle of the pitchfork. Median Line Analysis allows us to predict likely areas of support and resistance with great accuracy across different vehicles and varying timeframes. The Cross Pair Analysis covers a dozen non-US Dollar pairs on a daily basis, looking at context via Weekly and Daily charts and a detail via 240, 60 and 20 min ones.
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