I have received an email noting that I concentrate on timeframes longer than 60 minutes and asking if Median Line Analysis can be used on shorter charts such as the 20 minute. The answer is that it is applicable to any timeframe from Weekly down to tick charts, but with the volatility (and consequent potential for large gains) that we see on the Cross Pairs, I tend to look at 60 minutes or above.

Chart 1:

To show how one could use the methodology on a 20 minute chart let’s have a look at Chart 1 which shows the GBPNZD. No matter the timeframe, what we are looking to do is to quickly establish the path of price and then to delineate the angle of ascent or descent by means of a pitchfork. I am always looking for distinct A, B and Cs in order to use as pivots and in this case the pitchfork variant that works best – or best describes the path of price – is one known as a Modified Schiff. The point of origin of the pitchfork is moved 50% in both time and price from the A pivot towards the B pivot.

Whether or not the pitchfork is valid, ie correctly describing the path of price, comes from activity along its angle of ascent or descent. In this case the angle of ascent clearly matches what we are seeing. For example, the first two red arrows show support along the line of the lower Quartile and the second two red arrows show resistance along the line of the upper Quartile. Clearly the lines of the fork are describing supports and resistances and it now remains to track the strengthening and weakening of trend along the defined angle.

Chart 2:

As time moves on, note how price falls to the red circled Sliding Parallel just above the Lower Parallel. This can be seen in more detail in Chart 2 where the puce line shows the exact double tap on the lowest level we reach in the fork. Until the second touch we would not know that this was indeed a Sliding Parallel – it was a level we would be watching because we had found support there once before but until a second touch it had not been “proven”. Note also the slightly higher green Sliding Parallel – again a double tap on the line drawn in the angle of the pitchfork.

Chart 3:

Chart 3 shows the way price moved up and away from the area of the Lower Parallel before running into anticipated resistance and falling back once more. not only did we find resistance along the Median Line but at the exact point at which it met the green line of resistance across prior highs. A trader taking a long form the lowest Sliding Parallel at 1.9486 would probably have closed their position at about 1.9598 where these two potential resistances coincided.

Since then price has retraced somewhat; in terms of this fork we are seeing a lowering of resistance – from the arrowed upper Quartile to the Median Line. We will watch to see if trend strengthens or weakens by watching if support now steps up or down along the angle of the pitchfork and whether resistance also continues to lower or not. I hope that I have shown how the methodology can be used on 20 minute timeframes and how by defining the path of price at an early stage we can look to high probability areas of support and resistance.

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.

I recently hosted a webinar looking at the Cross Pairs – it is available to watch at this link:

http://www.coghlancapital.com/node/8759

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