34 Marlin Pring on Market Momentum

Measuring Objectives

In some instances when dealing with trendline violations in price, it is

possible to come up with measuring objectives. This concept can also be
applied to momentum analysis. For instance, it is a normal practice to
measure the maximum distance between the trendline and the price (Point
AA1 in figure 2.6) and extend it downwards at the point of penetration (Point
AA2). (The process would be reversed for a down trendline as in figure 2.7.)
Figure 2.8 shows this same approach applied to an oscillator. Of course,
the measuring objective only has implications for the oscillator, but quite
often momentum and price reverse simulta neously. Moreover, these
measuring objectives sometimes repeat several times and also serve as
important pivotal points, as shown in figure 2.9. In all these examples the
measuring objective should be used as a possible turning point or an
additional piece of testimony in our weight-of-the-evidence concept. Since
the reliability of this technique is somewhat limited it should never be used in
isolation as a basis for making a forecast.
Generally, the more significant the momentum trendline, the stronger the
possibility that it will be followed by an important reversal in price. If the
trendline for price is just as impressive, then the odds of a major reversal
relative to the time span under consideration will be that much greater.

Figure 2.6