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Andrews Pitchfork
| Andrews pitchfork is a study using
trendlines. A basic understanding of trendlines and
support/resistance levels is appropriate when finding
application and interpretation using Andrews
Pitchfork's. In constructing the study, starting
points are chosen. The first is a major peak or
trough on the left side of the chart display. The
second and third starting points are chosen to be a
major peak and a major trough to the right of the first
point. |
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After all starting
points have been decided, draw a trendline from the
first point (the most left) so that it passes directly
between the right most points. This line is called
the handle of the pitchfork. The second and third
trend lines are drawn beginning at the starting points
and parallel to the handle. Dr. Andrews suggested
that prices make it to the median line (or handle) about
80% of the time while the price trend is in place.
This means that while the basic long term price trend
remains intact, Dr. Andrews believed that the smaller
trends in price would gravitate toward the median line
while the larger price trend remained in tact. |
| When that does not
occur, it may be evidence that a reversal in the larger
price trend may be in progress or provides evidence of a
stronger bias at work in market. When price fails
to make it to the medial line from either side, it is
often an expression of the relative enthusiasm of buyers
and sellers and may predict the next major direction of
prices. If prices fail to reach the median line
while above the median line, it is a bullish and failing
to reach the median line from below is bearish. |
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Look for validation of support and
resistance to help identify if penetration of one of the lines
or levels is significant. A reversal or continuation of a trend
is often the resolution of a breakout of prices from a trading
range or pattern. Basic support and resistance principles
indicate that when price penetrates a previously validated
support line, the line then becomes a resistance level.
Similarly when price rises above a validated resistance level,
the level then acts as a support zone while prices remain above
it. It is a good idea to watch volume changes when price is
approaching a support or resistance level. Volume will often
give indication of the relative enthusiasm behind the current
movement.
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