Intersecting Lines: Multiple Signs of Confirmation

Every technical indicator and trading technique allows us the chance to see the market through a specific angle or point of view. These indicators standing alone may not provide accurate buy and sell signals as the market is very much multi-dimensional. However simple chart analysis allows us to isolate those points on the chart where multiple signals agree. At these points, our probabilities of being "right" increase in our favor as the market moves somewhat under the influence of a ‘self-fulfilling prophecy'. As more traders note the same signals, this implies a greater amount of buy and sell orders which inevitably drives the market higher or lower.

With this in mind one of the most widely used and easiest approaches is the use of trend-lines. This can take the form of horizontal lines extending from left to right on the chart, diagonal sloping lines, and Fibonacci retracement lines. We can see the following 1-hour chart shows us how the USDJPY recently traded near the 115.50 large round figure. These large numbers standing alone may represent a degree of either support or resistance, as many traders and institutions tend to use these price levels as a basis to buy and sell.  More importantly, this horizontal line also intersected with the 38.2% Fibonacci retracement level drawn from recent highs. Furthermore, we can see our former support line (which often times becomes new resistance) also intersected these two aforementioned lines at nearly the same time. With that said, it is important to note that these lines may not necessarily meet at the same "exact" price level. However within a matter of 20-30-pips, every line met at nearly the same spot on the chart. What's more, as the current trend appears to be to the downside, traders who choose to sell-short have the benefit of trading in the same direction as the overall trend, which typically is in our favor. Best of luck and happy trading!!!