JamesBrown

Look at Major Pitchforks, Dating back to 2000 on Spy

AMEX:SPY   SPDR S&P 500
Not attempting to predict anything here. Just giving a look of how valid pitchfork levels can be in retrospect and how they can be useful in spotting big swings and future price pivots (swing trades).

The latest pitchfork could have been useful as a predictive tool, going way back. All the tests of the median line that already began in 2012 and happened several times in 2013 and again in 2014 validated the pitchfork as "in play", or demonstrating that the market is in trend within the time and price projections of the pitchfork in question.

Having had that knowledge (that the pitchfork was long validated, and yet to be invalidated as a strong indicator of price and time behavior), we could have expected price to want to snap back to the median line after a break below it and a perfect time to have utilized this high probability situation would have came at the double test of the major pitchfork level (-1) that occurred after the major correction of August 2015.

A good plan, now in hindsight, would have been to enter on that second test, with a stop below the -1.25 line, targeting a median line tag. That would give a decent probability trade (one would think, since the pitchfork had been validated so many times in the past as a "strong pitchfork") with a very attractive risk/reward ratio.
One might theorize that since price broke to a lower part of the pitchfork on the second major swing (second set of up facing arrows to the right) compared to the first (first set) that price is more likely to not reach as high in the pitchfork on the second swing up (compared to the set of down facing arrows).

That was a rather strong looking rejection by the median line, after all, and it is clear with a quick glance at the pitchfork that price has lost the momentum (price/ time relationship) that carried it through most of this long standing pitchfork, by quickly tagging the -1.75 after tagging the -1.00, when neither had been tested in the last 3.5 years (since the bottom pivot of the pitchfork came in). That the median line held up as resistance, after standing for so long as support, is also noteworthy.

Being that price is coming up on a long standing (many times tested and validated) intermediate downtrend line at about this level, and in conjunction with price testing a major pitchfork level, one could definitely make the argument that now is a highly probable time for a pivot to the downside (shorting opportunity).

An obvious target would be a test of the last major swing low (second set of up arrows), which is not outside of possibility given the new price behavior and the fact that the current price channel (not shown in the chart) calls for another test down there. Stop would have to go above the highest high of the last major swing (two down arrows).

So, there is a trade here, that's fairly low risk. Not sure what the probability is that the lows are tested, but the probability of a down pivot between here and the previous highs has to be 50% or better, given the context of the intermediate trend-line and pitchfork levels coming into play, not to mention some major fibs extension and retracement levels and horizontal S/R levels.

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