Median Line And Andrews Pitchfork
Imagine having the ability to draw a single line – the Median Line – on any stock or futures price chart and know there is a high probability prices will reach that line. That is exactly what Dr. Alan H. Andrews proposed in his Action/Reaction Course in technical analysis of the markets in the 1960’s and 1970’s.
Andrews so named his course to honor the work of Roger Babson, who Andrews credited with first applying Newton’s third law,
“For every action, there is an equal and opposite reaction”,
to the financial markets. Babson developed financial forecasting methods according to this law in the early 1900’s, and was credited with being the first to forecast the stock market crash of 1929.
Andrews’ original course is somewhat vague and difficult to interpret. Little has been published concerning Andrews’ trading methods that he used to make over a million dollars in a few short years back in the 1920’s.
You may be asking, “That is great that the method worked decades ago… BUT… does the method apply to today’s markets?
If it does – what would that reveal about the markets?
Andrews traded in the “Golden Age” of technical analysis…BEFORE computers. Back then, price charts were received in the mail typically once a week. Price bars and line studies were drawn by hand.
Today’s computers allow technical traders to apply a variety of indicators based on complicated mathematics to a price chart with a click of a button. Is there still a place for the technical analysis methods of the last century? You may be surprised.
Line studies such as the Median Line can serve as LEADING indicators of potential price direction. They have a PREDICTIVE nature. Most other indicators are LAGGING indicators. They RESPOND to price action AFTER the fact. Would you rather know where prices ARE – relative to where they HAVE BEEN.
Would you rather know where prices ARE GOING? Andrews suggested prices were always headed to the latest Median Line.