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Strategies & Market Trends : Systems, Strategies and Resources for Trading Futures -- Ignore unavailable to you. Want to Upgrade?

To: Stoctrash who wrote (43783)	2/2/2001 10:24:28 AM
From: forkit	Respond to of 44573

Fred: A few thoughts, without seeing the chart your are talking about: Median lines that have been 'respected' by price are important. The more times a median line is tested, the more important it becomes. When you look at longer term charts [weeks, months, quarters or years] I assume you are looking at cash charts. Babson taught action reaction lines and Dr. Andrews and others certainly incorporated this important concept into their tools. For example, you mentioned that you noticed that price will break outside of the 'normal' outside median lines of a pitchfork and that break is often a fib ratio. The traditional three lines are the median line and the upper and lower sloping median lines, where the upper and lower lines are determined by the pivots used to define the pitchfork. One of the chart packages I use is GET and they built their pitchfork tool so that it allows you to choose the traditional upper and lower lines only OR it allows you to add internal parallel lines or external parallel lines and these lines are described in terms of the fib ratios of the more traditional median lines--so you might have it draw the normal set of lines, plus the 1.618 line outside the upper and lower median lines, etc. The same relationship you observed when talking about price breaking out of the median lines by a fib ratio happens inside the median lines as well--and by, I mean that it's common for price to only approach the outer lines to the .618 level, rather than the 1:1 level of the normal pitchfork. IF price only makes it to the .618 level and then turns, I always add a new parallel drawn through that .618 level and then do the same for the other side [meaning, if price only made it to .618 of the lower median line, I draw a parallel through that point and I also draw a parallel through the upper .618 level. Now, how does all of this relate to the use of 'older' median lines that were respected by price before a parabolic run up?? Besides drawing fib proportioned 'outer' parallel lines to the median lines, don't forget that Dr. Andrews taught what have been termed as 'warning' lines, which are multiples of the width of the 'normal' median lines. When you keep longer term charts updated, don't forget to put in warning lines [I usually draw in a set of up to four, and I add them in light pencil as I need them]. These are akin to action/reaction lines. To some it sounds spooky, but price respects multiples of the levels it 'was' respecting on the original median lines. Again, I would say that the more this original set of median lines was tested and respected by price, the more important these warning lines would be. Fred, I hope this reply made a small bit of sense. If not, just ask questions and I'll try to be more clear. Tim