Take a Ride on the Elevator for Quick Profits! (Part 1)

09/15/2008 12:00 am EST

Focus: STRATEGIES

Timothy Morge

President, MarketGeometry.com

In a recent MoneyShow.com article, I demonstrated how several energy points strung out horizontally can continue to attract price, dragging price horizontally until their influence has run its course. Then, at the final energy point, price usually shows us a change of behavior and a trend commences. But until the “hallway” has been run, price remains stalled. This is normally seen before economic numbers, but the charts have no knowledge of upcoming economic numbers—instead, the consolidation and then final breakout are all contained in price, regardless of what we all think of economic numbers.

As I mentioned in that article, energy points are one of the original tools I am proud to say I have brought to technical analysis, and I find them quite useful when looking for areas where price is likely to change direction or accelerate. They act as price attractors and are quite powerful. When two or more are strung horizontally or vertical, they can be confusing unless you let price tell you where it is going once it interacts with one or more of them.

In the last article, I showed you how price generally reacts when a series of energy points are strung horizontally. Now let me show you a different situation that can be equally confusing, but if you deal with it correctly, even more profitable:

elevator_chart

You can see in the chart above that there are two median lines and their parallel lines, and both sets have been tested. It’s not clear yet which set is “in charge.” And to make things even more interesting, note that there are two beautiful energy points stacked nearly one above the other that price is coming up to. Which median line will take charge? Which energy point will come into play?

More tomorrow in Part 2.

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