This Coffee chart is a great example how the median line (center line) acts like a magnet to attract price. How the market reacts to this line can be a very good indicator of future price action. A market that reaches the line quickly and with a wide range day will typically reverse at the line. On the other hand, a market that gradually moves toward the line in an orderly manner can penetrate the line slightly will usually trade on both sides of the line,  forming a series of small swing patterns, before breaking in direction of the origional trend and move towards next parallel line. Lastly, if the market surges through the line and closes with a major part of the trading range past the median, it will usually pullback to test the median line–offering one more opportunity to enter the market–before trading towards the new parallel line target objective.  Looking at the Coffee chart, you can see how the the market posted a wide range day on March 18, touched the line and dropped back to the lower support line before making another run at the median line. The market is currently trading along the line making higher highs.

The last thing of importance is when the market fails to reach the median line. This price action signifies a price failure can set up a major price move in the opposite direction. All of this things offer helpful insight into market behavior and  future market direction.

May Coffee

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