PR Sutton Andrews Pitchfork Jan09 PDF
PR Sutton Andrews Pitchfork Jan09 PDF
PR Sutton Andrews Pitchfork Jan09 PDF
howto
Why would I want one
Drawing them
Reading them
Trading them
Why do I need a pitchfork
TEST/RETEST
DOWNWARD FORK
Back testing is a pattern which confirms that you are not the
only person who sees the line. It confirms the existence of the
line and it's alignment
This graphic shows the template for a gap across the ML in both
directions. Gapping across the ML gives you confidence that an
area of high energy has been crossed, with enthusiasm.
Sometimes you get the back test of confirmation 3 or 4 days
later
Zooming the ML is commonly seen where there is a big move
afoot, but the ML is not gapped. Normally zoom bars come in
sets of 3, both up and down, and cross the ML, not the outer
tynes.
The Test/Retest pattern is the single most important trading pattern. The entry is to look for
the candle with the long upper shadow which touches the resistance tyne. Safest short entry
is at the close of trade, stop placed above the high of the original test candle. Target is the
ML, but a trailing stop is used in case the target is not reached. The retest often occurs at
3.25 trading days after the original test.
This slide is to demonstrate how common the pattern is, why you use a trailing stop to exit
the trade, and why you short a downwards facing fork (and go long on upwards facing
forks)
ILU with a penetrating test of the resistance tyne. The long upper candle and the close at or
below the resistance tyne is what you are looking for. Enter on the close and place your stop
above the swing point. With a penetration shadow this long, maybe above that (reduce
position size). Here I have shown how to use yesterday's high as the trailing stop. A better
strategy is to use a high from before 3.25 days ago, using an intraday chart.
This illustrates the breakout play, where you wait for the back test. If the re-test bar
penetrates the line it's OK, you are looking for a close at or above the bar, or an open next
day above the bar. This slide conveniently shows gapping behaviour. Put the stop below
the gap.
This slide of MQG was taken on 25/11/2009 after the close to illustrate a trade as it
appeared at the time. This provides the context where the red fork provided a test/retest
trade which should have been stopped out, but the green ST fork has now presented a
long trade.
This is the close up view. You can see the candle where the retest of the green support tyne
occurs, with a long probing shadow. The entry is on the close, although an initial position
could have been taken on the tyne, and a pyramid on the close (and possibly another
pyramid if the next open was higher) . The stop is positioned below the pivot point low, the
target is the red resistance tyne, or the green ML, probably both. Risk is $1, reward is $5.
Here we see a sliding parallel. These are typically seen where the retest pattern fails to
reach the tyne. They are drawn parallel to the tyne at the limit of movement and will
commonly be tested again. The stop should be placed outside the tyne, but that's really up
to you. This one also shows a test/retest on the pink resistance tyne, and several ML
reversals, which are more risky to trade.
This is MPO. If you study this slide you should be able to identify nearly
every pattern including at the end, zooming the ML followed by a
breakdown of support on one fork while confirming support on another
Some "STUFF" you should keep in mind
To get an idea of the probable path, we could put in an extra fork or two, so we might as
well zoom in to an 18 month time frame
Here I have left the edge of the old blue support tyne in view, and the 1st warning line at the
bottom. I then picked a couple of low/high combinations to go with a P2 of the absolute low.
As you can see, the forks are strangly parallel. This gives me quite a bit of confidence that we
are correctly framing the trend of price. I notice how the green fork is tending to keep price
within it's resistance tyne, but that it seems supported by the ML of the slightly longer time
frame pink fork. There is, of course, nothing to say there cannot be several concurrent
influences on price.
ADDITIONAL READING
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