HOW TO DRAW A PITCHFORKS ON CHART | FOREX TECHNICAL ANALYSIS |

WHAT IS ANDREW’S PITCHFORK?

Pitchforks were developed by Dr. Alan Andrews as a basic trend tool that identifies price channels and gives structure to a market advance or decline. These trendlines offer reaction zones and offer a guidance in both price and time.

EUR/NZD chart showing a pitchfork

WHAT IS A MEDIAN-LINE?

A median line is simply the bisector of a given channel or range. The median-line of a pitchfork often offers a point of reference and may trigger inflections or pivots in price. If a price breaks above the median-line, the target shifts to the upper parallel – likewise if price breaks below the median-line, the target shifts to the lower parallel.

EUR/NZD chart showing a parallels within a pitchfork

Consider the same chart above. A pitchfork can be applied by using the three reference points of the most recent low-high-low into the 2016 open (blue arrows), offering an up-trend to work with. As often will be the case, the slope is IDENTICAL to the previous slope derived off the subsequent April high- meaning this formation would have alerted us much earlier to where the April rally ultimately found resistance.

Note that on each subsequent rally, the advance reversed off the median-line with the final attempt in August ultimately pulling back into the lower parallel. This simple drill is meant to highlight that identifying the proper gradient, more-so than the tool used, is the most important aspect of slope analysis- obviously the earlier the better

Some important aspects to keep in mind when drawing pitchforks:

1. In an up-trend: reference points should be a low-high-low. In a down-trend: reference points should be high-low-high
2. When price approaches the median line, they will:
3. Reverse, or
4. Price will trade through the median line and head for the upper / lower median line parallels
5. Stress the Slope, not the reference points: When applying pitchforks, the most important thing is the slope that’s produced- Has price been responding to that slope? Have we seen pivots / reactions at the touch points? These are the factors that should be considering before operating off any given trendline. That said, there will be times you will need to adjust your reference points secondary lows/highs in order to fit the gradient more accurately.
6. Once price has broken out of the formation- look to identify a new pitchfork in the opposite direction. If price breaks the lower parallel of an ascending slope- Look for a near-term high-low-high as reference points for the correction lower. If price breaks the upper parallel of a descending pitchfork - look for a low-high-low to offer the up-slope on the reversal.
   
   
   
7. Once you have clearly identified a slope, parallels extending off key highs and lows will often times offer clear pivots in price and will be levels of interest for both targets and entries. It’s also worth noting that median-lines will be of added technical significance when they converge on other key technical indicators such as moving averages, Fibonacci levels, monthly / yearly highs and lows and sentiment.

KEY TAKEAWAYS ON PITCHFORKS AND MEDIAN LINES

Pitchforks can be extremely useful in identifying key reaction levels within market trends and once mastered, can be a crucial part of your trading strategy. Always keep in mind that the primary focus is to give structure to the market and better locate points of interest for trade opportunities.

In part three of the series, our article on Multi Time Frame Analysis discusses combining pitchforks with various overlay indicators. This can help in identifying opportunities in both price and time to offer a more holistic trading approach.