Chart chasing alert -- many will want to click through.
This is a long message but well worth the effort imho.
My earlier call of a test of 3610/20 and then up (we printed 3618.72, ranged for a while, and are now off again) was based primarily, but certainly not exclusively, on this piece of rocket science described below -s. It will be tedious to describe and more tedious to read.
Pull up an intraday of NDX. Use a timeframe somewhere around 30min. The dominant formation for the last few days has been a down price channel. I will try to describe the easiest way to draw the lines. It is not how I drew them a few days ago.
The top you can get by connecting:
-- high of lunch time Sep 27
-- highs of the morning of Sep 26
Extend the lines left and right. You will know you have the top line done properly if it touches the high of Sep 20.
Get the lower line of this channel by creating a parallel line. This is often much more useful than trying to draw a line connecting bottoms. (Bottoms in a downtrend are looser and should be trusted less.)
So, take the parallel line and peg it to the low of Sep 27, mornnig around 11:00. Again, I did not origianlly draw it this way. I am trying to make it easy. You will have it right if you see that it comes very close to other lows on the 25th, 26th, and 27th.
For the truly studious and fanatical among you, you will notice many other price interactions if you have charting software and are able to move one of these lines left and right through the price action since coming off the Sep 1 top.
This line defines the angle or degree of this leg down. All important price swings have been contained within channels created by these parallel lines. Go ahead, create a bunch of parallel lines and try to first dilineate the entire price move, then use others to delineate important price action in the middle of the channel.
These lines will often connect a previous high to a later low and vice versa. In other words, what you will notice is that price will manage to gain energy, move to a higher (i.e., more right) channel, then at some other time when it is losing energy it will fall back into a lower (i.e., more left) channel.
Heinz:
Lately I have been using this old trick in a new way. I have been studying Elliot waves and I am finding that if I draw the channels as soon as is reasonably possible, then I can more easily see the wave transitions. They often coincide with jumping to the next channel of equal importance.
Understand that I am not saying that this is the tool or anything so silly.
When the market turns, these channels lose most of their usefulness. One can not just keep drawing parallel lines to the right to predict ongoing S/R. Anyway, after the market turns I will then only keep the most important lines for later. For example, after this up leg, if we come back down substantially, then prices will interact sometimes with some of the old channel lines from the previous down move. This is most obvious I know.
(For the even more fanatical among you, draw trendlines down from the Sep 1 top where everyone of them is connected to the high of Sep 1. Draw them down through every important swing high and extend them forward. Interesting how price days later will interact with these lines. This is similar to Gann or Fib fan, but I find it more useful.)
PS: I am not claiming any significant TA work here. I just steal the work of others. -g (When I was a kid I thought I invented swimming under water -- this is not like that. -g) |
