V. 20:10 (75-78): Working Money: The Andrews Pitchfork Vs. Speed Resistance Lines by S. Yamanaka

Working Money: The Andrews Pitchfork Vs. Speed Resistance Lines by S. Yamanaka

Can you ever have too much support?

One of the pitfalls of using technical analysis to gauge stock movement is that it often depends on whether a stock is trending. In the early stages of a trend, there is often a hotbed of contention, especially now in the erratic, often seemingly psychotic movement of stock prices, whether or not a stock is beginning a new trend. So there would be an advantage in using a system that gets you into the market after a trend has been established. The question then becomes, if you’ve missed the beginning of a trend, how long will the trend continue, and is it worth investing in a stock that’s already gone up or down significantly?

Andrews pitchforks and speed resistance lines theoretically solve this problem by creating support/resistance lines around a trending stock. Support and resistance lines are pretty much what they sound like: They mark areas that a stock price tends not to penetrate. If the area is below a stock price and the stock seems to bounce off the line rather than fall below it, then it’s a support line. If the line is above the current stock price and the price seems unable to rise above it, then it’s a resistance line. Often, when a stock rises above a resistance line, the resistance line becomes a support line, and vice versa.