The DX hovering around 80.00 and shows no signs of support yet. Perhaps 79.50 beckons?Here below are a series of simplified €$ charts. In the daily chart we have a very obvious green down sloping fork with P0 being the approx Euro high of 1.47 in the height of the financial crisis in 2008. The first reaction line from this fork lies above price at 1.3325-13330 depending on the 'time of arrival'.
Last week we saw price twice try and rise through this reaction line but it failed and continued down to build a base at 1.2965 before starting this current trend upwards. I have added a 'discretionary' fork- This is to say that P0 is not correctly anchored viz-a-viz the Andrews laws and is anchored on the P0-P1 line so that the bottom pivot from yesterday sits bang on the LMLP. There is however a mathematical relationship with the P0-P1 line which is that the pivot chosen is exactly 75% from one pivot and 25% from the other on this p0-p1 line. The correct Schiff fork can be seen in the Ensign chart and is pretty useless (as is the mod Schiff which i have not bothered to reproduce). Even with this incorrect P0 the detail of the effect of the interaction with price and RL's can be seen in the two smaller screen shots an i am sure that you agree there is something going on here without doubt and shows great price reaction at each R-line.
However, would i consider a trade setup/entry using this fork alone? Absolutely not, but it does give me an idea that when price reaches its UMLP i should watch closely and then should this UMLP coincide with the RL from the long term reaction line (that we have seen resisted price already last week) and the downsloping green fork UMLP (again here we can see the interaction with previous price action & this forks RL's & regardless that price exited and then re-entered the LMLP)..then i would be extremely interested. All these levels coincide at around 1.3335-1.3340. It would follow that this would be some time next week unless fundamental data today pushes us there sooner and today is a Friday, so everything is possible. Last point to make is that i have included a 4hr chart which shows a common problem which is that it appears that price has already touched the RL. It has not and this distortion always appears in 15 min charts and above. Only when price reaches the RL in the 1 & 5 min chart can you be assured of a possible/potential reaction which is one reason why i find large TF charts very difficult to trade.
In conclusion, This is one of several long term reaction lines i am watching today for potential resistance and a reversal. I strongly believe that there is never one fork exerting influence on price action but many at any one given moment in time. What is more important is the energy contained in the current trend. None of us know how far price will rise and none of us know how strong and how much energy price has left to expend and as we all know, you should always trade with the trend. However anyone trading reaction and median lines is in effect often looking for price reversals & great care should be taken before trading against the market. So i will wait until i see how price is effected by this line and then if the change of trend is confirmed i will look for an entry. It doesn't need to be at the same level as the reaction line and only a fool would blindly sell/ buy at any given reaction line (regardless of how effective it (the RL) has proved to be in the past) but i am aware of this possible level & that if price reaches this level at the confluence of all these lines i have drawn i will be watching market behavior closely.
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