Tuesday, August 27, 2002
What are all those lines anyway???
What is an "Andrews Pitchfork"? Looks like a bunch of arbitrary lines! Useless!
Sure, I can point you to the A-B-C of how to draw one and even to create one. But of all the many technical methods, this one seems to baffle the casual viewer more than most "traditional" methods. Perhaps the biggest reason is that very little is written about the method and what is out there often over-complicates it.
Calling these lines "pitchforks" doesn't help. They are also known as a "bisect" and "median line", which to me are more suggestive of what is going on.
"Forks" are simply trendlines drawn using significant price points (pivots). What makes them useful is that they embody the funadmental Dow concept of balance, later expanded upon and popularized by many many market gurus including Elliott, Gann, and others. Using a physical analogy, there is an action followed by a reaction. The middle line, the "median line" literally bisects (cuts in half) price reactions as they relate to the originating pivot, the "action". Price is either above or below that balance as it moves out in time. Now that is quite simple.
The more one uses this method, keeping in mind the simple premise, the less baffling they become. Choosing the pivots also focusses attention and suggests potential changes as they happen. Everyone wants a number, a date, a simple answer. While bisects can do that, they also remind you that the market is always in a state of flux, moving from extemes and only briefly in balance.
Today's aggressive move off the lows has some characteristics of a genuinely bullish pullback rather than the start of a more severe correction. Nevertheless, there are enough weaknesses (still overbot, low volume, overhead resistance) to suggest keeping a tight reign on longs.
At last, over the rim
of the waiting earth
the moon lifted with
till it swung clear of the horizon and rode off,
free of moorings
- Kenneth Grahame,
The Wind in the Willows