I was waiting for someone to ask me, now my I have the spotlight to rant! :)
Yes that is my own proprietary pitchfork "Foxtrot's Fork".
The deviation between the candle means (the median line) and the last high (seen further on the left) is taken to be = the difference between that mean what I believe is the lower channel (if the stock decides to take a turn south).
Similar to Fibonaccis..you take a point on the apex, take its trend down to its minimum and that difference you project to note potential resistance on any downtrend.
On the flip-side if we take the stock to have a constant up trending channel, which appears to be what we have here, and a candle pierces the upper bound of the fork, it will more clearly indicate IMO a 'trend channel breakout' and indicate a bullish signal. This should also remind you a bit about MACDs, MACD compares the divergences between a short-term moving average and a longer-term moving average (the signal line) and when the short terms come out from the bottom and pierce through the signal line you get a bullish signal, similarly, the longer term average is the median line, and if the short term trend (the next few sets of candles) pulls away from it and pierces the upper pitchfork channel, I take that as a bullish signal. On the other hand if it deviates south towards the lower line, a bearish signal.
Also you noted it came up with an interesting phenomena..instead of your 'usual' uptrend channel, it looks like pasta around a fork twirling. And I use that line and think of it this way, if we assume sentiment remains roughly constant, then the candle trend should continue its trend in the same manner as the past, as it has been, so if it deviates from that trend (the median line) then there is resistance for it separating any further - hence it should catch up and correct itself. On the other hand, if it DOESN'T correct itself, and breaks away from the median line, then that suggests a change in sentiment (or the bulls/bears weakening) and is a bearish/bullish signal to me.
Neither is better than the other - I have noted that Funkymonk has used an even tighter channeled one.
Where possible I like to keep a difference from the textbook traders - gives me (and now you) a potential edge.
Very good question, hope the above helps explain it ;)
Foxtrot
CCC Price at posting:
86.0¢ Sentiment: Hold Disclosure: Held
