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How Accurately can Hidden Geometry Find Tops and Bottoms?

 

By Ron Jaenisch

As one reads through the writings of Andrews and Babson what is quickly discovered is that they are strategies for making trades that are several weeks in length. In my writings there have been numerous articles about finding entry and exit points with Andrews and Babson Techniques. Some of the techniques include Babson Reaction Lines which focus upon the location of the end or start of short term moves and long term moves. Techniques using the Andrews pitchfork parallels and sliding parallels are used for finding entry points that are short term or long term in nature.

In a recent article in Tradersworld readers discovered the existence of a little known technique called the Babson Reversal Line. The details on this line are only in the expanded course. This is a technique designed to find reversal points near the end of longer term moves. The problem with this indicator is that it alone does not tell you how long the reversal will hold. With a very strong trend, this can be a short time period. In addition there can be several bounces off of the line. This is illustrated in November time frame of the the ES chart below.

 

 

In a prior article the readers of Tradersworld magazine were introduced to Babson Reversal Lines. These are selectivly used to determine the area where a reversal in trend is likely. They are most reliable when used in conjunction with other Andrews lines and trading concepts.

Since then the question has come up………How is Andrews Pitchfork used in conjunction to find the start of serious corrections?

In the above gold chart you can see that price made it to the Median Line and Babson Reversal Line and reversed. What is not so obvious is that Advanced Andrews Students also see a Double trouble in this pattern prior to price reversing at the Babson Reversal Line. The double trouble signal is used to determine when the trend is in trouble and about to have a significant correction. The double signal is discussed in various videos in the expanded course.

The reversal in the Ultra Bond chart shows the same signals, to the trained eye. Price went to the ML and the Babson Reversal Line.

In the Natural Gas one can see that the price made it down past the far parallel and down to the Babson Reversal Line. While the Babson Reversal Line appears to also be near no consequential pivots, it is only useful near the lows and not near the other pivots at higher prices. What we have found is that the Babson Reversal line needs to be used in conjunction with the median line and the double trouble signal to signify strong reversals. The BRL is only drawn AFTER the Andrews line has been reached. This is because otherwise one may be misled into trading at an earlier potential pivot point. Near the end of moves ( major pivots ) there are often multiple BRL’s.

In the Jap yen chart above it is clearly indicated that price made it down to the ML and Reversed and up to the far MLH and reversed.

As you can see in each case above in the ES price went up to the Median Line and reversed. In addition the other necessary indicators are also triggered at the point price makes it to the Median line and reverses for a 5-15% quick correction.

Is there a time when this is likely to not work out favorably? The above Aussie $ chart shows that price went down towards the Median Line and reversed at the BRL. What did it fail to do in this situation? Can you spot the difference?

 

As the US Congress is  about to vote on the tax bill and you noticed that in the ES there was a double trouble signal and an MLH above price here on the daily es chart,  in addition to a Babson Reversal line……..what would you conclude? Below is a one hour chart, about a week later.

 The above chart high price was exceeded the next day. This shows the degree one can manage risk.

 

Does the Double Trouble signal only occur at the end of a thrust move? Does it occur at the end of corrections? The double trouble signal was first discovered, by this writer, at the end of a correction that was the start of an incredibly strong and long thrust wave in the hogs. Above is a gold chart in a correction, where the double trouble signal was discovered.

What is the take away? When you see a double trouble pattern,watch for a reversal at the Babson Reversal Line  If it was in a thrust wave, look for the next move to be a correction of about 5-25%.

At this point price went past the upper H and hit warning line #1. The next warning line is at about 2690.  The final top in this cycle could come after price hits the second   warning line or a second hit of the first warning line, which would be at a price that is shown as a high on the last chart below.

Color me short.