Charting with Median Lines

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Bond Perspective by Timothy Morge


Jul 26, 2011
Price continues higher, breaking above the up sloping Median Line before pulling back--but note that it does not test or break the Lower Parallel, nor does it break below the prior Major Swing Low.



Then price heads back higher in a stair step fashion. You'll note I added a pink line that has the same slope as the Median Line and connected it to the first Major Swing High and this line catches the current high to the tick.
Median Lines and their parallels mathematically project the path of least resistance for price--this means it is the most probable path of price, since all things in motion seek the path of least resistance.
You can see that price is currently making higher highs, but if you measure its progress against the sloped lines, its path of least resistance, it is just re-testing its prior high. I'll bet I've just totally confused all of you! When I show these charts in live seminars or live web casts, I tell people to turn their head to the right and look at how far price has moved upward against the sloped lines. But I believe most people don't turn their heads--and truthfully, most people listen to me talk about price making progress against the sloped lines but really don't understand what I am talking about. So let me quote an old saying: A picture is worth a thousand words! Here goes!


By rotating the chart so your eyes align the sloped Median Line with the natural horizontal plane, you can now see that as measured against the probable path of price, the Median Line and its Parallels, price is not making new highs--it is re-testing its prior highs.
There are no signs that this market is turning yet, no 'tells' that this market may soon exhibit a change in behavior. But when you looked at the prior chart, price was clearly making new higher highs; when you look at the same chart aligned with the path of least resistance, price is merely re-testing prior highs.
Don't worry if you still don't understand what I mean. I believe humans are visual in nature, and I have plenty of pictures!

GBP/CHF 4Hr

@AlexC

What would be your take on the DOW given the parabolic move we got last week?

Also, in the example where the chart is rotated to present the sloped Median Line on a horizontal plan. What is the purpose of doing this? It transforms a Higher High to an equal high. That's not reality. Do you expect price to retrace at the test of the pink line. Would you go short?

Answering your second question first, the purpose of rotating the chart is basically to understand that diagonal trendlines do carry similar weight as horizontal trendlines.
What I would do in taking any trade is based on the risk factor meaning risk 1x amount to gain 3x or more.

On the Dow, because the 25500 area is a quarter way to the Upper ML from the Lower ML, there might be a possible reaction.

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Correction: More accurate on pivots for pitchfork than the previously posted chart.

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