Parallel Tracks
I’d have trouble trading if I used a program that wouldn’t draw parallel lines. I’m constantly drawing lines beginning at various pivots that are parallel to a trendline already on the chart, and every line on this chart is parallel.
Some of them will fly off into space and have no relationship to price, but then you’ll get a day like today where every line becomes a reversal point. I use these lines just like Fibonacci or support/resistance levels. In other words, when the market approaches a parallel I watch closely to see how price reacts. Sometimes it gives me a setup.
Unless you are used to watching for them, these parallel lines only become evident during analysis after the market is closed. But if you look for them daily, you will eventually start to see most of them in real time. Here’s what I said back on April 27th when I last showed multiple parallel lines:
Two of the three darker trendlines shown were on the chart from yesterday, and are parallel. The third and forth trendlines added today are also parallel to the others. This situation happens more often than you would expect — another reason to retain old trendlines.
Here we are again, with some market geometry that should look familiar.
Today we gapped up, went sideways for several hours, and then completed an A-B-C at 162% and at the first parallel line. There is then another A-B-C ending at the magenta parallel and at a Measured Move where C = A.
Something many don’t understand about my charts — notice how the two A-B-C moves overlap. To me a Fibonacci extension is just how the present move relates to the previous move in the same direction. This means that I will sometimes use the “C” move of one pattern as the “A” move of the next pattern. The next time there may be no overlap.
The key is not a set of rules, but spending enough time with charts that many of the repetitive patterns start to become familiar. Parallel lines. Reversals at 127%. Fibonacci retracements and extensions.
You’ll always miss some in real time, and others will turn into losing trades. But a surprising number will do just what they did last week or last month. Usually with a slight variation, but close enough to be profitable. That’s what my type of trading is all about.
