This is a technical analysis technique (also known as "Andrews pitchfork" because of its shape) for establishing upper and lower support and resistance lines.ï¿½ A median line is drawn connecting two or more lows in a rising chart. Once this line is drawn, a ninety degree line is drawn using the top and bottom of a significant correction. From the top and bottom points of this correction two parallel lines are drawn which then define the upper and lower range limits for the share. Consider the chart below:
In effect the Andrews pitchfork establishes a channel which enables the investor to see when the share is on its lower support or upper resistance lines. Obviously, the exact points used to draw the median trend line and choose the top and bottom of the correction line will have a large impact on the channel. This technique can also be used in reverse on a downward trend. In your software you can construct an Andrews pitchfork by using the trendlines feature as in the diagram above.
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