Measured Moves: Simple, Powerful and Profitable Trading Tools (Part 4)
05/08/2008 12:00 am EST
Let’s look at another set of charts:
Crude Oil prices are in a steady long-term up trend but have recently pulled back down to test and break below the up sloping lower median line parallel. Note that as price came back up, I connected the lows, adding a sliding parallel below the original lower median line parallel. I also added three lines above and below that are parallel and have the same distance as the distance between the median line and its upper and lower parallels; these are known as warning lines and they are used to find support and resistance for measured moves in run away markets. If this market takes off to the up side or the down side, I expect one of these warning lines will help me pinpoint where price is likely to stop. A new break below the sliding parallel will be an ominous signal that a new large move to the down side has begun.
Note that price finally broke to the down side and began a long and protracted slide of nearly $20 a barrel.
More in part 5 tomorrow.