Technical Analysis Price Projections Part 4

Action and Reaction Lines

Action-reaction Method 1

The action-reaction method 1 uses three lines: the reference line, the action line, and the reaction line.

Special offer: "Capturing Profit with technical Analysis"

Figure 9.15:   Action-reaction method 1.

Look at figure 9.15 for an application using the action-reaction method 1. The reference line can be a median line, a trend line, a center line, or a multi-reversal line.

For every action, there is a reaction.

The action is the left side of the chart, or the past; the right side of the chart is the reaction into the future. Action lines are drawn under the same angle as the reference line, through a past pivot point.

The reaction is the future on the right side of the chart.

Reaction lines are drawn under the same angle as the reference line and at the same distance as the corresponding action lines. 

Action-reaction Method 2

The action-reaction method 2 uses the same three lines as the action-reaction method 1: the reference line, the action line, and the reaction line.

Figure 9.16:   Action-reaction method 2.

Look at figure 9.16 for an application of the action-reaction method 2. The reference line can be a median line, a trend line, a center line, or a multi-reversal line.

Only one action line, a parallel line with the reference line, is drawn through a pivot point in the past.

Reaction lines are drawn parallel to the reference line and at equal distances from each other using the distance between the action line and the reference line as the basic measure.

I mainly use the action-reaction methods to find crossings with other price projection techniques to get an indication on the time axis when a target could be reached.

Technical Analysis Price Projections PREVIOUS -Part 1 -Part 2 -Part 3 -Part 4

STOCATA Stocks Technical Analysis HOME