Finding Good Vibrations can Lead to Great Profits (Part 2)
05/20/2008 12:00 am EST
In the chart below (also used in Part 1), I added a red up sloping center line or median line that connects five major highs and lows. I then ran a line parallel to the center or median line through the high for the move and that gave me the upper median line parallel. Last, I measured the distance from the center line to this upper median line parallel and draw a line below the center line that same distance—and happily noted it caught the bottom of the first open gap. This told me that the reverse median line was vibrating with the market and should be a good predictor of the path price is likely to take as time moves forward.
Because the reverse median line and its parallels are rather wide, I added in a traditional blue median line off alternating low-high-low pivots. I immediately note the pair of energy points, areas where the two median line sets intersect, and circle those areas, because they usually act as price attractors: I expect they will act as magnets and draw price to them, even though they seem far apart.
This is the same chart, but I zoomed in closer so you can see the energy points and the pivots I used to draw the blue traditional median line and its parallels.
More tomorrow in part 3.