When is it time to throw away a set of median lines ? We draw, and re-draw, test and fail, adjust the points and redraw again, but when do we throw away a set of median lines? When is it time to throw in the towel? Well earlier tonight we discussed in detail in the chat room why this set of median lines deserves to live. At least for now. To sum it up here are a few of the reasons outlined: First of all this set is counter trend. OEX is obviously in a strong up trend. So the obvious first question is “why even bother with a down trending set ? ” Because we need to be prepared for a reversal or at least a pull back. We need to know where and when to take profits on a long, and / or where and when to consider a counter- trend position. Now, lets get back to why this set needs more time to be considered as valid >>>> In several locations price has respected this set. See chart below highlighted ovals. Secondly, What other pivots could we use with which to draw a set of downward sloping Median Lines from ? In a market as strong as this with little to no pull back, this is the best most valid set of pivots I can find. So until something better comes along I will use this set and its duplicated slope in an attempt to identify the pullback or reversal. Duplicated Slope ???? whats this you say ? See pic number 2. below. Duplicate the slope and a set of action /reation lines can be drawn and used for time going forward… sometimes ad infinitum / When can a set of median lines be thrown away ? …. Sometimes Never.
Notice I say ’sometimes” never. Other times we draw a set of median lines and quickly recognize it to be of little value. so Sometimes we can discard a set almost immediately. It is a ongoing practice to continually draw and learn how price reacts.
Comment by MarkoFibo — 04/17/2010 @ 1:56 pm