a pitchfork discussion, page-19

Hi guys; back on line & a see thread featuring the pitchfork (p/f). How could I not comment? (& also try to keep the thread alive so others for and against the p/f post away. yes I dare you to take on the validity of the fork! LOL)

10 c, your 20c worth on the use of gaps is interesting & ultimately I agree 100% with the main thrust of your post that the big issue is finding lines that work. Excellent charts & provoking thought is always good.

Previous attempts have been made to discredit the p/f & I thought that it would be good to share what attracts me in a general sense to the fork.

So what attracted me to the p/f when I entered the world of TA 12 months ago?

Basically the elegance of a technique that helps use previous price patterns to give a potential future pattern combined with the reliance on the concept of a median price and consequently the median line. Basically if any object is moving through time (in this case a share price) it is fairly logical that it is trying to get to a place of, lets say, lowest resistance. So IMO at its simplest what the p/f does is uses some well tried techniques of using previous highs and lows in price to try to determine a med line and then use those high & low as proven determinants of parallel channel lines.

Let me explain my views by a few simple charts. ASX (the share) has featured a few times on w/end charting & its one I follow so lets use it here. (I have probs pinched the forks shown from Totters or others shown so plagiarism alive & good)

Firstly lets look at the chart, 2 years of daily and simply draw some purple lines by eye in what IMO represent what are the 3 BIG trends.

1. Finish of the GFC 1 down,
2. the 09 rally and
3 the recent 2010 down/sideways movement.

So me thinks it would be nice if a technique helped an investor know what to do at the outlier price regions highlighted with blue rectangles.

I consider the p/f to be affective at being able to do that & after looking at most of the indicators & techniques available consider it one the easiest to use. (& it is bloody fun to use & be warned, slightly addictive)



There are plenty of forks that can be thrown on this chart but lets look at a couple of the classics: zoomed in to the last 15 months or so to see the last move mentioned above.
Starting from the left:

The red fork which is proved by the classic Retest (R) forecast an 80% probability of a move to median and sure enough we move from first blue rectangle to second at the median tine of fork. A $6.12 move.

Price moves up to red res tine, breaks through & gives customary backtest until finally moving ahead & leaving red behind. So we look for a new fork. And keep drawing until one fits as price moves north. Finally a fork that does not get broken but gives a R shows up & is drawn in pink. Sure enough it forecasts again a move back to med tine. A $9 move.


So keep drawing forks on the way down & we have just had one that might be a retest and forecasting a move up again. Shown in blue it could forecast a move back to around $33.50 with a stop at the pink res tine..

Just my thoughts!

GJ