In my last article I stated that I wanted to “note how the lines of the pitchfork are there to define the path of price rather than to act as inviolate supports and resistances. Median Line Analysis seeks to recognise and follow the trend of price – the angle of ascent or descent – and to delineate this path by means of the pitchfork. We are looking for validating action along the angle of the lines and for the strengthening or weakening of trend rather than whether or not the lines of the fork remain intact.” Since I wrote that, even though the vehicle has continued to the downside moving out of the pitchfork itself, the lines that we have delineated continue to allow us to track price.
Image 1 is an updated 240 minute chart and shows these recent moves. We had originally validated the fork – shown that it is correctly marking the path of price – by means of the puce Sliding Parallel, showing support and resistance, just above the Median Line. We were slightly wary of the lowering resistance in the angle of the pitchfork as shown by the series of puce circles. Lowering resistance can lead to lowering support and this is precisely what we saw.
From the fourth puce circle price fell very strongly through potential supports – notably the Lower Parallel. Weirdly, the fact that such a very strong bar took price through this line does validate the line – it took such a strong bar to breach the support. What next happened also caught my attention – the previous support of the Lower Parallel (as shown in the first red circle) then becomes resistance as shown in the second and third red circles. As on the horizontal when support then becomes resistance that is viewed as bearish.
When we see a spike low, the practice is to draw a Sliding Parallel off this bar and this is the case with the puce line with the green circles. Again we see the same pattern develop as above – the line of support drawn in the first green circle is breached and is then retested from underneath. The trend continues with price stepping down, with support becoming resistance. Despite price falling beneath the Lower Parallel of the fork we still use the lines of it to show the strengthening and weakening of trend.
Image 2 shows a 60 minute chart of the same vehicle and indicates how one could follow the move lower using the same methodology but in a different timeframe. Remember that what we are looking to do is to establish the path of price using the obvious pivots as the A, B and C of our fork.
Note the line of resistance that is quickly apparent along the Upper Parallel of the pitchfork – this would be enough to keep a careful watch on it for an indication as to future moves. Price does spike above this line to the Outer Quartile before falling very strongly and you will note that support emerges at the other Outer Quartile – there is some “balance” or “equilibrium” around the Median Line of the fork with one Outer Quartile being resistance and one being support.
Note how price moved from this Outer Quartile support and established a new channel – running between the resistance of the green Sliding Parallel and the support of the Lower Parallel. If anything the last few bars show that resistance may have lowered somewhat and it now appears to be along the line of the Quartile. I will continue to monitor this chart looking for any raising or lowering of these supports and resistances that we have noted – remember that it is strengthening or weakening of trend that we are following here. The 60 min chart gives early warning of what to expect on the 240 minute chart and I will obviously relate this chart to the larger one and will watch that for any further breaches of the supports and resistances that we have noted above.
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