Andrews'
Pitchfork
The
lines formed by Andrews' Pitchfork can help
predict channels of support and resistance
in a trending market.
Overview
- Andrews' Pitchfork
is a method of channel identification
in a trending market.
- This technique,
in effect, splits a major channel into
two minor equidistant channels.
- The lines
in the Pitchfork tend to delineate lines
of support and resistance.
Andrews'
Pitchfork was developed by Dr. Alan Andrews,
based on what he called his "Action/Reaction"
techniques. Originally called the "Median
Line Study," this pattern is based on a set
of lines drawn from peaks and valleys on a
price chart. When linked together, the arrangement
of lines closely resembles a farmer's pitchfork.
Dr.
Andrews' median lines, and the pitchfork pattern,
often indicate lines of support or resistance
where prices tend to stall out or reverse.
Interpretation
Andrews'
Pitchfork is plotted on a price chart as follows:
- First, identify
a significant reversal point (high or
low) and this becomes Pt. A.
- Draw a line
(shown in red) from this point to the
next significant reversal point; at Pt.
B.
- Then plot
a line from a significant point early
in the trend (Pt. C) bisecting the first
line (in red) half way between Pts. A
and B. This is the Median Line or "handle"
of the Pitchfork.
- Now, draw
two lines parallel to the Median Line,
one starting from Pt. A and the other
from Pt. B. These form the "tines" of
the Pitchfork.
- Presto! Andrews'
Pitchfork.
This
is a quick introduction to the Pitchfork technique;
Dr. Andrews' price study methods were typically
much more complex than what I've shown here.
He also counted waves using what he called
the "0-3/4 pivot count rule" and the "5 count
probability rule."
Signals
Watch
for reversals when the price approaches or
penetrates the lines of the Pitchfork. As
with any trendline, the more often support
or resistance is confirmed the more reliable
the line can be considered. In the example
above, the lower channel managed to contain
most of the price activity - not perfectly
- but enough to indicate that the channel
was indeed providing important support and
resistance.
Also
see Trendlines and Breakout Patterns
