30.09.2011_Friday

Price opened lower than yesterday's close,tested the previous high near to 5033 levels and then dropped down to close at 4940, close to our expected levels.As of now, the price is within supporting levels of a trendline channel shown in blue and the triggerline drawn from schiff median line starting pivot (50 % of previous swing.)
So the options of the swing move look 30:70 now for a move up / down.
My reasons for the possible move up are
Price moves indicate the tussle between bulls and bears for the past two-three days.The previous minor swing high has been crossed and the pullback was supported at his level.ie resistance becomes support.Today the low is still higher than yesterday's low.The prices seem to have completed a correction with an ABC pattern within a trendline channel.( though still today's low bar is not confirmed as the swing low.we'll wait to see monday's action)
IF the prices hold at this level, then the move can happen upward.But price has to be really strong as the climb beyond the resistance at 5033 is more than the down side support breakdown level at 4930.( 5033-4940=93 points against 4940-4930=10 points).The global cues are also so negative the negative outlook has more probability.
Price is exactly near the middle of the range of the past one month and it is going to be tough call for trade decision on Monday till the trend emerges.

29.09.2011_Thursday

Price made an early low and climbed upto the zone till 5035 where I expected the resistance ie the point where the Upward Green Median line and downward red Upper median line intersects.
The pullback was contained within 38.2 %R of the previous swing and today making a higher high than the prev high, makes me consider the probability of an upmove developing.,The swing is heading towards prev high at 5150 zone , either immediately or with another pullback to 4987-4942 support .If it stops at 4987 and move north its going to be a swift move.Or else 1-2 days of consolidation till 4942 levels and move up.Below 4942 however this view gets negated and we're in for the move down.
Plan would be to look for support pattern at 4987-4942 zone to buy for target of 5150 zone. with stoploss of 25-30 pts.Below 4906 , price should go below the previous low of 4759.

28.09.2011_Wednesday

Minor pullback from Median line.The 5000-5030 range is going to be major test , as to whether nifty will breakdown or move northwards.As we have made a higher Low , the upward move is also a probability if it crosses 5030.There should be some consolidation with some zig zag movements around the Longterm downsloping Pitchfork .( shown in earlier chart)

Median Lines Method(contd)

Foundation of the Median line - 50 % ratio

50 % Ratio indicates the strength of a developing swing / trend and is an important level to use in trading.We calculate the 50 % levels of Year H-L prices,Month H-L prices,Week H-L prices and use them to outline the market's strength when below or above the 50% level.For trading using swing H-L prices and calculating 50 % level, we can assume the trend is down when prices are below and up when prices are above.

The System or Method

Median Line method can be a stand alone system with some simple rules similar to the concept of using trendlines.Like in trendline channels, this is also a trend identification channel , but gives a higher probability of the points where the price can lead to.There are many common features ,and some nuances of median lines which each individual can develop as per his trading style.

There are purist traders who trade only with median lines and patterns for confirming support and resistances at the Median Line, Upper median line parallel and Lower median line parallel.
It can also be combined with Fibonacci ratios,Moving Averages, Stoch Indicator for identifying swings and exit entry points.



The approach while using ML is to anticipate when price reaches the S/R , as to where it can go.The clues to identify will be previous horizontal S/R points, trendlines, retracements,breakout of minor swings etc.Also, patterns like congestion of bars, ledges, 123 patterns can be used for confirmation and trade entries/exits.

Using median lines on a chart is like drawing a road map to ascertain where price is going.The strength, weakness of the trends can be identified by drawing the lines and where the reversals can take place.

Drawing the Median Lines

Pivots are the starting points in drawing the Median line set.
Pivots can be defined as the turning points in charts.
They can be
- selected visually where the swings are identified with low and highs
- Pivot Bar should make a higher high and the bar after the pivot making a lower high .
- The High pivot bar will have previous 2 bars with lower highs and subsequent bars making lower highs / and vice versa for a low pivot

Swings
Lines between two pivots will be a swing.Smallest swing in a chart in a time frame will be a minor swing.
Combination of swings will make a major swing.A major swing direction will change when a minor swing high / swing low is crossed by the next swing high / low.

So we identify the pivots and mark the minor and major swings in the Chart.
The simple rule to identify the trend is that the trend is up when we are making higher highs and higher lows and vice versa for downtrend.

The Median lines can be used effectively only when they are drawn to encompass the trends already present .When we draw the median set and the price has bounced off the support and resistance levels at the UMLH and LMLH and the Median line, then we can presume the median line set which has been tested will for a good map for the trends into the future.This is very effective in long term daily and weekly charts.

For short term trading, the same concept applies and we identify the trend based on the previous 5-8 swings , but can be done with a minimum of 3 swings.For very short term intra day trades , we can keep working out the forks for smaller swings also.But of course it has to be combined with other patterns to confirm entries and exits.


See below some charts where price meets the median lines and reversals are identified.

State Bank of India Chart Followup

27.09.2011_Tuesday

The gap open was a surprise, but with the global markets moves,was probably a possibility.The resistance expected at 4920 was broken on the upside after the first 2 hours and no looking back...
My expectation was a steady rise towards the resistance levels and price bars to show a negative turn which did not happen so did not enter any short trade.Will watch out for resistances at higher levels at 5000-35 range , the next resistance band for any negative cues.

26.09.2011_Monday

A "V" day today.A tussle of war between bulls and bears for the "V"ictory!!Still bears have the upper hand as of now...hmm

"LAZY "Z" PATTERN

Today's 60 min chart showed up a different pattern which is very interesting and would like to share with you.How it pans out tommorrow ,am eager and waiting to see...

This pattern called the "Lazy Z " pattern which Timothy Morge - the median line expert outlined in one of his Articles in detail.Based on the same , I'll run through this chart..

The traditional method for buying at a prior support is when price touches it and putting a stoploss below.If price plunges through the low, one get's stopped out.The reason,breakout traders, enter new short positions.These new short orders push the price lower,and executing stoploss orders left by those who have long positions at the "percieved" support.But once,the breakout traders orders and the stoploss orders are done, price moves back above the trendline and heads higher - as the new short positions entered on the break below begin to get stopped out!This Timothy Morge calls it getting washed and rinsed!


His description of the Lazy Z pattern:
1.Price makes a new low for the move,zooming through a median line or trend line.
2.Because New short positions were taken by the breakout traders, a wash and rinse rally ensues,shaking out the "weak"positions.
3.Once the new weak short positions are washed out of the market,price goes on to make new lows for the move.
We now wait for a retest of the Median /Trendline and sell at that point.The stoploss would be above the previous minor swing high.The stoploss should be protected , as when prices move up again we'll again have another round of sellers entering on retest of the swing high and push prices lower.Only if the move is strong , our position will get stopped out.So the trade decision is well planned one against the one when we enter Buy on retest of earlier supports / or Sell on breakdown of earlier support as a small stoploss point cannot be defined as per price bars.

Here in the Nifty Chart ,
1.At 4911 , previous Swing Low percieved as a buy point / support for the down move buyers would have entered with stoploss below.
2.Next day , the price plunges through the median line support,hitting stoploss points of buyers and new short position buyers ,dragging it to a new low.
3.Once the selling stops , the price moves up,picking up the stoploss of sellers and heads higher to hit the Median line.
4.Here we find price hitting resistance with prices again moving down,so sellers/short positions are being established again and pushing price to new Low.This confirms the presence of more sellers in the market.
The day ends with again a short covering rally closing near the Median Line.The pattern now is to Sell at the retest of the Median line / closer to the previous minor swing high .The stoploss would be above the minor Swing High.The new move towards the downside can be expected when the momentum builds up with more sellers trying to sell closer to test of the swing high.

Hope you enjoyed this Post!!

My plan would be to sell at the range between 4920-4900.In the event price does not reach this range,would prefer to enter the break of the midpoint of the swing from 4759 to close of today.