The concept of the “Pitchfork pattern and its powerful trading method were first developed by Dr. Alan Andrews. “Pitchfork” and median line concepts work in all time-frame charts and in all instruments. Other “Pitchfork” theories were developed by Roger Babson and Timothy Morge.
Andrews’ “Pitchfork” consists of three “swing” pivot points, A, B, C and three parallel lines. Construction of the “Pitchfork” is relatively simple. Draw a line connecting B and C points. From A pivot point, draw a line connecting A to the mid point of B-C. The middle line-from A is called the “median Line.” Draw parallel lines from B and C along the median line to form a “Pitchfork.”
Trade: Dr. Andrews suggested that about 80% of the time, when trend is intact, prices gravitate towards the median line. Hence, when prices reach to the top trend line, take profits or short the market. Also, when prices reach the bottom trend line, enter a long position or close a short position.
Target: The targets for “Pitchfork” are usually at the median line. If the price does not stop at the median line, it will tend to move to the lower trend line (for shorts) or move to the upper trend line in case of a “long” trade.
Stop: Pitchfork upper and lower trend lines act as the “stop” levels for trades. For “short” trades, place a “stop” order above the upper ‘pitchfork” line, Similarly, for “long” trades, place a “stop” order below the lower pitchfork line.
Here are a few variations of how to calculate a “Pitchfork.”
The median line is extended from A pivot point parallel to B and C pivot lines.
The mid point of A and B is used to draw the median line.
A parallel line is drawn from the midpoint of A and B to B and C Pivot lines.
Trading Pitchfork Pattern
The example above displays a “Pitchfork” formation from the Russell Emini (ER2) 30 minute chart. The basic premise of “Pitchfork” trading is that prices trade from support to resistance in a channel format. In the example above, the “swing” pivots, A, B and C are identified and a “Pitchfork” is plotted to show the support and resistance areas. On January 10, ER2 reached the lower trend line support at 779. A “long” trade is triggered at 780 at point 1. A “stop” order was placed below the trend line. The first target is the median line at 788. ER2 rallied through the target level and closed at 796 (upper trend line). Next a “short” trade was triggered at point 4 at 805. A stop loss is placed at 807. The target was set at median line (at 799). This “short” trade continued to trade below the lower trend line (at point 5).