Trend line advisors
This article is intended for educational purposes only. It must be used as one of several aids which help the technical student to reduce guesswork as far as possible. Experience will teach the great value of this tool, however, if deductions are made cautiously. It is a tool that can look brilliant on its own in hindsight; however, working with trend line channels in real time can often yield false signals and breakouts.
Redrawing trend line channels is common trend line advisors using these patterns. The theory is that traders can buy as price approaches the lower end of the trend line and sell as price approaches the upper end of the trend line. Of course, considering the overall market environment, longer-term trend line advisors analysis is vital.
The theory also suggests that, if the lower trend line is broken in an up trending channelthat is a sell signal and potential trend reversal, whereas if the upper trend line is broken in a downward-trending channelthat is a buy signal. It's also important to know and study a signal that can occur with an upside breakout of an upward-trending channel and a downside breakout of a downward trending channel.
These can be extremely accelerating and fast moves, but be aware that price could also be signaling an end to that move in the near future as these are very emotional types of price movements.
We can see a well-defined Parallel Trend Channel in the price ascent since mid-April Note also the ABCD sell pattern formed within this channel that completed mid-May and reversed back trend line advisors the lower demand line. The high from February is But, as we know, anything can happen. Please note the "cd" extension areas.
This is when the CD leg extends to a longer length than the AB leg. The upper blue horizontal trend line is marking the February highs for reference and relationship to these patterns.
As per Gartley's statement quoted above, it would be prudent for traders to use other tools, such as a momentum indicator like the MACD I show on Chart 3and monitor for potential divergences. Other tools could be implemented as well, but the point is to use other tools.
The RSI is approaching the February highs and could also be monitored with this setup. I will be monitoring these patterns in the coming days and weeks.
I hope you can join me for that, and don't forget to register for my presentation with the Virtual MoneyShow on June 12, details below. It's always important to learn entry skills, which include combining elements of intraday time frames, momentum indicators and other price patterns to control risk and also, at times, waiting on the sideline until there is confirmation.
There are trading techniques that can be learned and implemented to control risk and monitor the price behavior.
Supporting documentation for any claims and statistical information will be provided upon request. Any trading symbols displayed are for illustrative purposes only and are not intended to portray recommendations. The risk of loss in online trading of stocks, options, futures, currencies, foreign equities, and fixed Income can be substantial.
We never know what price will do; the only element we can control is the risk. Best wishes for successful trading!
Leslie Jouflas, CMT.