The EURUSD FOREX pair has been respecting dominant Andrews Pitchfork trend channels both on the way up and on the way down. It serves as an educational example and current reference levels for areas to watch going forward in time.
Let’s see the current “Euro-Dollar” pair daily chart:
(Click for full-size chart)
The first Pitchfork on the way up began with the October 2008 low and moved to the March 2009 high (as drawn) then April 2009 low. The resulting ‘auto-trendlines’ emerged from the default Andrews Pitchfork Tool.
Price ‘bounced’ between the Midline and upper ‘tine’ line throughout 2009, but sharply broke under the median line in December 2009 which indicated a potential reversal in trend.
The trend did go ahead and reverse, breaking under the lower ‘tine’ trendline also in December 2009 as price rallied to test the underside of the lower trendline in January, granting an excellent low-risk ’short sale’ trade set-up.
The trend did reverse, and so we draw a new Andrews Pitchfork heading down as illustrated (using an advanced method of using the Median Line on the January swing high instead of the default tool).
This drew three trendlines heading lower, and price has bounced between these trendlines as drawn, save for a gap above the line in April which sent price right back below the median line shortly thereafter.
Unless we see another rise above the median line – roughly at the 1.32000 level – then we would expect the pair to continue trailing lower to the 1.3000 level or beyond, depending on what the fall-out continues to be from European debt (Portugal, Spain, Greece, etc).
Play around with the Pitchfork Tool if your software program allows it (most do – even StockCharts.com) and don’t be afraid to think outside the pitchfork… I mean, box!
Remember, at the end of the day, the Andrews Pitchfork tool is really just an ‘auto-trendline’ tool.
If you’ll be attending the Los Angeles Trader’s Expo in early June 2009, be sure to check out my half-day classroom training session entitled “Locating and Managing Retracement, Breakout, and Reversal Trades.”
Corey Rosenbloom, CMT
Afraid to Trade.com
Follow Corey on Twitter: http://twitter.com/afraidtotrade
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