Retracements
Extensions
Elliott Extensions
Z + 262%
262% of
Z added to
Retrace-
Swing
ment Low
High
Z + 162%
162% of
Z added to
Z + 100 %
Retrace-
ment Low
Swing
Swing
High
High
Z
Z
Retracement
Low
Swing
Swing
Swing
Low
Low
Low
Retracement of
Fibonacci Extension
Fibonacci Extensions
Swing Range
added on to the end
added to the end of
of the Swing
a Retracement. These are
normal Elliott Wave type
extensions as used in
Waves 1,2,3, etc.
T-119
GET
Applying Technical Analysis
ANDREWS MEDIAN LINES
Dr. Alan Andrews developed a technique called Median Lines. His method by itself is used as a complete trading tool by many traders. Over the next few pages we will discuss the application of Median Lines in conjunction with Elliott Wave Analysis.
To draw a Median Line, you need three points. Once three market points are identified, you are ready to proceed with Median Lines. The first point is called the Base.
BASE
Connect a straight line between points 2 and 3. Find the midpoint of this line.
MIDPOINT
í
BASE
Draw a line connecting the Base Point with the Midpoint. This line is called the Middle Line.
ë
MIDDLE LINE
BASE
T-120
GET
Applying Technical Analysis
Draw lines from point 2 and point 3 that are parallel to the middle line. These lines are called the Upper and Lower Parallel Lines.
UPPER PARALLEL
LINE
MIDDLE LINE
LOWER PARALLEL
LINE
BASE
The downside Median Line is exactly the opposite of the upside Median Line. Once again three points are found. The first point is the Base Point. Find the Midpoint on a line between points 2 and 3. Connect the base (point one) through the Midpoint. This line is the Middle Line. Then draw lines from points 2 and 3, parallel to the Middle Line. Again, these are referred to as the Upper and Lower Parallel lines.
UPPER PARALLEL
LINE
BASE
MIDDLE LINE
LOWER PARALLEL
LINE
T-121
GET
Applying Technical Analysis
Per Dr. Andrews rules, the prices will do one of two things as it approaches the Middle Line:
1) The price will reverse at the Middle Line
OR
2) The price will trade through the Middle Line and head for the Upper Parallel Line and then reverse. Some examples of both situations follow:
REVERSE FROM MIDDLE LINE
BASE
ç
REVERSE FROM MIDDLE LINE
BASE
ç R e v e r s e
T-122
GET
Applying Technical Analysis
çR e v e r s e
GAP THROUGH MIDDLE LINE
BASE
Extended Parallel Lines
In some instances, the standard parallel lines have to be extended. This is necessary to accommodate fast moving markets. Again, the standard median line is drawn. The Upper and Lower parallel channels are drawn. You are then ready to extend the normal parallel lines. Find the distance from the Middle Line to the Upper Parallel Line. Using this same distance, draw a new Parallel Line above the Upper Parallel Line. The same procedure is used for the Bottom Parallel Line. If you are using the Pitchfork tool from the Global Toolbox, this can be done by simply turning on the ratios over 100. This will automatically measure the distance from the Upper and Lower Parallel lines (which is the 100% ratio) and draw the Extended Parallel Lines off of both the Upper and Lower Parallel lines.
T-123
GET
Applying Technical Analysis
UPPER PARALLEL
LINE
MIDDLE LINE
LOWER PARALLEL
LINE
Extended Parallel Lines
UPPER EXTENDED
PARALLEL LINE
UPPER PARALLEL
LINE
ôSAME
MIDDLE LINE
ôSAME
LOWER PARALLEL
LINE
ôSAME
LOWER EXTENDED
PARALLEL LINE
ôSAME
T-124
GET
Applying Technical Analysis
It may be necessary to draw extended Parallel Lines to catch the top of Wave 3. This is usually the case when the market really gaps through on a very powerful Wave 3.
UPPER EXTENDED
PARALLEL LINE
UPPER PARALLEL
Wave
LINE
Wave
Wave
Wave
Wave
LOWER PARALLEL
LINE
Wave LOWER EXTENDED
PARALLEL LINE
T-125
GET
Applying Technical Analysis
There will be times when the Wave 2 retraces at a steep rate. This is the time when you should use
in the pitchfork tool. With this button toggled to the ON posi-
tion, the pitchforks automatically adjust the direction and spacing of the pitchforks to compensate for the steep Wave 2 retracement. You should pick the normal Base and drawing points, and GET will “Modify” them for you.
Before Modify
UPPER PARALLEL
LINE
MIDDLE LINE
LOWER PARALLEL
LINE
BASE
After Modify
UPPER PARALLEL
LINE
MIDDLE LINE
BASE
LOWER PARALLEL
LINE
T-126
GET
Applying Technical Analysis
Combining Median Lines With Wave 3
Once the Median Line is drawn on Waves 1 and 2, you can now use the Median Line technique to predict the top of Wave 3.
Wave 3 will usually end on either the Middle Line or the Upper/Lower Parallel Line.
Wave
Wave
Wave
Wave
Wave
Wave
T-127
GET
Applying Technical Analysis
Wave 3 tends to have a Fibonacci relationship with Wave 1. We can calculate this projection in advance.
The Median Line method tends to catch the top of Wave 3. By combining the two techniques, it is possible to predict a time period during which Wave 3 will top out.
Once Wave 1 and Wave 2 is in place, draw a Median Line from the base of Wave 1
through the Midpoint of Wave 2. Draw the Upper and Lower Parallel Lines as before.
Now add the Fibonacci Projections to the chart. The Fibonacci Projections will cross the Median Lines. Each of these crossings are a potential time period for the top of Wave 3.
á
X
= Target for Wave 3
X
á
X X
2.618 X WAVE 1
1.618 X WAVE 1
â
â
TIME
è
T-128
GET
Applying Technical Analysis
AUTOMATIC REGRESSION TREND CHANNELS
How to use it, and trade with it
The Regression Trend Channels are very useful in defining and containing the trend of the market. When the prices break a well established Trend Channel, the market usually changes Trend. However, it was a tedious task to draw the Channels, so we decided to automate this process. First, let me discuss a problem that some traders encounter when using the Regression Channel.
PROBLEM ENCOUNTERED:
In the Trend Regression Menu, the GREEN light on the Standard Deviation Box has to be turned ON. When it is turned ON, the software calculates the standard deviation for the upper and lower channels. If the Standard Deviation is turned OFF (no Green light), then the software simply finds the highest and lowest bars, and draws the upper and lower channels using these high/low peaks. To use the Trend Regression Channel as discussed in this material and in the seminar tapes, you need to TURN THE STANDARD DEVIATION to ON (GREEN LIGHT ON).
PREFFERED
Uses highest
î
bar for Upper
METHOD
Channel.
Channels with
Standard Deviation
Channels with
Turned ON.
Standard Devia-
tion Turned OFF.
ë
Uses lowest
bar for Lower
Channel.
T-129
GET
Applying Technical Analysis
MIN PIVOT SELECTION FOR AUTO CHANNELS
We tried several different methods and settled on the following: The user defines the last Pivot from which the software draws the Auto Channels. For longer term Trend, use the Primary or Major setting. For real short term Trends, use the Intermediate or Minor settings. We recommend this study be used by selecting the Primary or the Major Pivot.
Otherwise, the Auto Channels will be constantly re-drawn every time a minor pivot is made. This constant switching will make the Auto Channels useless. The following examples will make the Pivot selection clear.
PRIMARY PIVOT
By selecting Primary
Pivot as the minimum
pivot, the software looks
for the previous Primary
pivot and draws the Trend
Regression Channels
Auto Channels with
from this Primary Pivot.
PRIMARY pivot
When a new Primary
selected.
Pivot is labelled, the
Channels are automati-
Channels are drawn from the
cally re-drawn from the
ç previous Primary Pivot.
new pivot.
MAJOR PIVOT
Major Pivotè
By selecting Major Pivot
ç
as the minimum pivot, the
software looks for the pre-
vious Major pivot and
draws the Trend Regres-
Channels are drawn
from the previous
sion Channels from this
Major Pivot.
Major Pivot. When a new
Major Pivot is labelled,
the Channels are auto-
Auto Channels with
matically re-drawn from
MAJOR pivot
the new pivot.
selected.
T-130
GET
Applying Technical Analysis
A REAL TIME EXAMPLE USING AUTO CHANNELS
(THE SETUP)
The following trade is in the September Canadian Dollar using Elliott Wave analysis, Auto Regression Trend Channels and the Elliott Oscillator.
Key Points to observe:
#1
The Oscillator pulled back to zero and stayed above the max drop allowed.
#2
Profit Taking Index is at 48 (greater than 35). This means that there are good odds for a rally to Wave Five. Buy Sept Canadian Dollar at the break of the Auto Trend Channels.