Median Lines analysis


posted by kailash on Sat Mar 29, 2014 08:44 am

#1

              i have started this thread for median line lovers please  post you valuable experience about median line here it could beneficial for all  new baby's & learners .

regrads

kailash


posted by kailash on Sat Mar 29, 2014 08:54 am

#2

Developed by Alan Andrews, Andrews' Pitchfork is a trend channel tool consisting of three lines. There is a median trend line in the center with two parallel equidistant trend lines on either side. These lines are drawn by selecting three points, usually based on reaction highs or lows moving from left to right on the chart. As with normal trend lines and channels, the outside trend lines mark potential support and resistance areas. A trend remains in place as long as the Pitchfork channel holds. Reversals occur when prices break out of a Pitchfork channel.

Picking Three Points

The first step to using Andrews Pitchfork is selecting three points for drawing. These points are usually based on reaction highs or reaction lows, also referred to as pivot points. Chart 1 shows McKesson (MCK) with Andrews' Pitchfork extending up from the June low. The first point selected marks the start of the median line. Points 2 and 3 define the width of the Pitchfork channel. The median line is based on two points: point 1 and the midpoint between points 2 and 3. As such, the median line starts at point 1 and bisects points 2 and 3. This controls the slope (steepness) of the median line. The outside trend lines are then extended parallel to the median line. The red Andrews' Pitchfork shows an alternative median line based on the July low for point 1. Notice that the red median line still bisects the line between points 2 and 3, but it is steeper than the blue median line. Pitchfork slope depends on the placement of point 1.

Chart 1 - Andrews Pitchfork

Chart 2 shows a downward sloping Andrews' Pitchfork with Accenture (ACN). The blue median line starts at point 1 and bisects the line between points 2 and 3. The outside trend lines are parallel and equidistant from the median line. For slope reference, the red Pitchfork uses the August low as point 1, which makes the median line steeper.

Chart 2 - Andrews Pitchfork

Flexibility with Point 1

Sometimes the median line needs adjusting to establish a realistic slope. Pitchforks that are too steep will be easily broken. Pitchforks that are too flat will not capture the trend. Chart 3 shows Electronic Arts (ERTS) with Andrews' Pitchfork extending up from the late January low. Ideally, point 1 would be based on the low for the move. Points 2 and 3 would mark the first reaction high and first reaction low after point 1. However, a median line based on the late January low coincides with support in March (green arrows) and resistance in July. More importantly, it creates a channel that contains price action for many months. Notice that ERTS became overbought when prices moved above the upper trend line of the Pitchfork. The trend fully reversed with the break below the lower trend line.

Chart 3 - Andrews Pitchfork

Chart 4 shows Intuit (INTU) with two possible Pitchforks. The red Pitchfork was too steep. Notice that the trend did not reverse when prices moved below the lower trend line in late April. The alternative was to base the median line on the mid December low. This creates a flatter Pitchfork that is more realistic for an uptrend. As with normal trend lines, steep trend lines are more easily broken. The validity of the blue Pitchfork was confirmed when prices hit resistance at the upper trend line in early April and found support at the lower trend line in early May.

Chart 4 - Andrews Pitchfork

Support, Resistance & Reversal

Pitchfork trend lines can provide support or resistance. In an uptrend, the lower trend line acts as support to define the overall trend, the upper trend line acts as resistance and the median line defines the strength of the trend. Prices should reach the median line on a regular basis during an uptrend. Failure to reach this line shows underlying weakness that could foreshadow a trend reversal. Chart 5 shows Ciena (CIEN) moving higher within a rising Pitchfork. Notice how the lower trend line offers support and the median line offers resistance. Even though Ciena met resistance at the median line throughout the uptrend, it managed to reach this line on a regular basis to affirm the uptrend. Failure to reach the median line would have shown underlying weakness. CIEN broke the lower trend line with a sharp decline in November. Notice that this break held as the trend line then turned into resistance.

Chart 5 - Andrews Pitchfork

Chart 6 shows CSX Corp (CSX) with a pair of corrections identified by Andrews' Pitchfork. Notice that both corrections formed after sharp advances. For the first correction, it was possible to draw Andrews' Pitchfork after the early July high. Notice that prices did not break the median line in late July. Also notice that prices held above the median line in August. This showed strength that led to a breakout in September. It was possible to draw the second correction after the early December high. Prices did move below the median line, but soon recovered and CSX broke resistance with a surge in January.

Chart 6 - Andrews Pitchfork

Trigger Lines

Andrews' Pitchfork also incorporates the use of trigger lines, which are essentially trend lines that originate at point 1. Upper trigger lines extend down from point 1 through the peak at point 3. A break above the upper trigger line is a buy signal. Lower trigger lines extend up from point 1 through the trough of point 2. A break below the lower trigger line acts as a sell signal. Chart 7 shows Rowan Companies (RDC) with a lower trigger line extending up from the July low and an upper trigger line extending down from the November high. These trigger lines are similar to normal trend lines drawn off two reaction highs or reaction lows. Their signals are often much later than the signals generated by Pitchfork breaks.

Chart 7 - Andrews Pitchfork

Conclusions

The steepness of the Pitchfork channel depends on the placement of the three drawing points, in particular point 1, which is the start of the median line. Even though point one usually starts with a reaction high or low, it is sometimes necessary to adjust point 1 to insure a realistic price channel. Unfortunately, there are no hard rules for point placement. Instead, chartists must use judgment and experience when drawing channels. This is where the subjective nature of technical analysis comes into play. As with most aspects of technical analysis, it is important to build experience by experimenting with Andrews' Pitchfork. See what works and what does not work first hand. This is the only real way to master an indicator.

Using with SharpCharts

The Andrews Pitchfork tool can be accessed when annotating a SharpChart. There are four steps involved. First, click on the Andrews' Pitchfork tool icon at the top. Second, move the cursor to the chosen starting point for the median line. Left click to set point 1. Third, move to the second point and left click to set point 2. Fourth, move to the third point and left click to set point 3. Andrews' Pitchfork will now appear on the chart with the median line and outer trend lines extended.

Chart 8 - Andrews Pitchfork

posted by kailash on Sat Mar 29, 2014 08:57 am

#3

in above posting charts are missing so one can click on this click http://stockcharts.com/school/doku.php?id=chart_school:chart_analysis:andrews_pitchfork 

posted by kailash on Sat Mar 29, 2014 08:59 am

#4

Good sites for median lines learning

http://marketgeometry.com/ 

http://www.medianline.com/ 

posted by santanu on Sat Mar 29, 2014 11:56 am

#5

"Chart 4 shows Intuit (INTU) with two possible Pitchforks. The red Pitchfork was too steep. Notice that the trend did not reverse when prices moved below the lower trend line in late April. The alternative was to base the median line on the mid December low. This creates a flatter Pitchfork that is more realistic for an uptrend. "

 Jeremy Schiff.  a student of Dr. andrews  after some work  come out with  a concept to draw the special ML ,Dr Alan named it  as Schiff  ML. Dr.Andrews also construct a modified  version of it, Known as modified schiff ML. 

To tackle the steepness in some specific cases only these ML are used ,rules are there when and which schiff ml to be used.

posted by sanjay on Sat Mar 29, 2014 01:28 pm

#6

Nice to see this thread...keep up ur good work kailash bhai and santanu da!!

posted by sajal on Sat Mar 29, 2014 01:38 pm

#7

good kailash bhai  aab aap maiden line ke piche pad gay ho to iska postmartem kar kar hi baithoge ...............

posted by purvi on Sat Mar 29, 2014 01:40 pm

#8

thank u so much kailashji, was learning, is it possible to post nifty / bank nifty charts based on this daily to learn, trade, discuss, to watch market 

posted by gopala on Sat Mar 29, 2014 01:50 pm

#9

Good initiative Kailashbhai

posted by santanu on Sat Mar 29, 2014 03:48 pm

#10

"Trigger Lines

Andrews' Pitchfork also incorporates the use of trigger lines, which are essentially trend lines that originate at point 1. Upper trigger lines extend down from point 1 through the peak at point 3. A break above the upper trigger line is a buy signal. Lower trigger lines extend up from point 1 through the trough of point 2. A break below the lower trigger line acts as a sell signal. "

My last  post and this one is to  put thing into its correct place .

 Dr,Hagopian  friends of  andrews observe When prices reverse trend before reaching  ML(20%),proper action may be taken  as soon as prices cross the trend line they were moving along .A large countermove is indicated  when prices cross the first Trend Line sloping away from the original line (ML).this known as hagopian rules.

NO need to draw "1. Upper trigger lines extend down from point 1 through the peak at point 3 .....". to draw the Trend Line sloping away from the original line (ML) is important .

posted by santanu on Sat Mar 29, 2014 03:56 pm

#11

For example Soya chart, UTL2-4 (Upper trend line) is the first UTL to slope away from 2ML3-4 . when the trend line broke sell signal generated ,price move up to retest the broken UTL 

posted by santanu on Sat Mar 29, 2014 04:04 pm

#12

DTL 3 and 1ML 2-3

posted by Jadhav on Sun Mar 30, 2014 10:44 am

#13

कैलाश भाई, आपको शत शत प्रणाम . हमे इसकी बोहोत जरुरत थी.  

posted by Jadhav on Sun Mar 30, 2014 10:58 am

#14

“ There are a few concepts that you should probably remember when using the
lines in the median line group.


1) Prices are always headed to the new median line and they reach it 80% of the time.


2) If prices fail to make it to the median line they will compensate for it by going a lot further than the
median line in the opposite direction.


3) If they do not make the median line two times in a row then a shake out has just occurred and a
substantial move is starting.


4) After prices pass through the median line they typically go back towards it and then go further in the
original direction.


5) Prices have a tendency to turn at the intersection of ml parallel line and warning line intersections that
come from old and new median lines.


6) If prices turn exactly at the ML, it is considered a reverse ML and the warning lines are typically reliable
for use as action reaction lines.


7) The modified Schiff ML is used when the ML is not likely to work because the angle is too steep . The
0ML 2-4 may be used at P5 to handle this.

posted by kailash on Mon Mar 31, 2014 12:46 am

#15

The Median Line often serves as a magnet to price.  When price gets near the Median Line, it often does one of three things:

1.) Price reverses,
2.) Price accelerates,
3.) Price consolidates. 

posted by Jadhav on Thu Apr 03, 2014 03:52 pm

#16

posted by Jadhav on Fri Apr 11, 2014 03:59 pm

#17

posted by Jadhav on Fri Apr 11, 2014 04:13 pm

#18

Simple trick to draw Modified schiff ML of Blue fork (from above MCD chart):

1.  Draw Blue Fork first

2. Then Draw Grey fork, with point BC mid point

3. And consider that BC mid point as "A" point of Magenta  Schiff ML , and you will get modified schiff Median line,,, that is all :)

@ kailash bhai

posted by Jadhav on Sun Apr 13, 2014 07:58 pm

#19

1.   Normal Schiff Median line is 50% of AB and 50% of BC line (connecting both 50% points and its extension towards right)

2.   When the retracement of AB rally is more than 50% or above 61.5% .......then Modified Schiff Median line is drawn and it works well    ,     if fulfill this condition.

posted by kailash on Mon Apr 14, 2014 07:36 pm

#20

THANKS JADHAV BHAI FOR SHARING IT



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