Following on from yesterday’s webinar in which I commented on this pair I have received a number of emails asking me to look at it in more detail. The methodology that we use seeks at an early stage to recognise and define the path of price of a vehicle. Using pitchforks allows us to monitor the strengthening and weakening of trend along the line of ascent or descent.
In this instance having identified A, B and C pivots I drew the Schiff (or unmodified Schiff) pitchfork shown in Chart 1. This is a variant which moves the origin of the pitchfork 50% of the distance from Pivot A to Pivot B in terms of price but not in terms of time. Having drawn the pitchfork we need to validate it, by which I mean that we have to ensure that price action is occurring along the angle of the fork. The first, and very definite, indication of this is shown in the red circle as price exactly touched and then rejected away from the Upper Parallel as shown in the red circle.
Price fell from there beneath the Lower Parallel and found support along the dotted Sliding Parallel. During the webinar I tried to stress that it was not the lines of the fork itself that were important but the angle of ascent or descent that they followed. We do not immediately discard the fork just because price moved below the Lower Parallel – we would still be pretty confident from the Upper Parallel touch that we were defining the angle of ascent so would continue to look for further confirmation by means of continued support or resistance in the line of the fork. I focused in on the Sliding Parallel support, highlighting the arrowed bar, which showed a very strong move up and through the Lower Parallel, closing very close to its highs. In a counterintuitive way, the fact that it took such a strong bar to re-enter the fork does indeed further validate it.
In the webinar I noted how price moved higher to find resistance along the Median Line of the fork and how support stepped up to a line along the Quartile as shown in the series of red circles. I pointed out how a long trade could have been taken from this Quartile support, with a stop of as little as three points to place it below prior lows, and a target of the Median Line some 130 points higher. From the last in the series of red circles price move all the way to the puce highlighted Sliding Parallel – from 1.8050 to 1.8374.
Price has retraced somewhat form that level and we are currently looking to see continued support along the Median Line in the green circles. We have watched support step up from the Sliding Parallel beneath the Lower Parallel, to the Quartile and now potentially to the Median Line. All these levels have been in the line of the fork and we will look to continue to define the moves in this vehicle by means of this pitchfork.
I hope that I have been able to give more of an idea of the way that we use pitchforks to track vehicles by means of strengthening and weakening of trend along paths that we have identified. The analysis allows us to anticipate or predict areas of support and resistance with great accuracy and to use these to take high probability, low risk trades.
The following link takes you to a recording of the webinar dated July 9th :
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