TECHNICAL ANALYSIS
thing will become obvious while looking at the following examples and by trying these concepts out in practice yourself; the larger the Marabuzo, the greater the importance that the resultant 50% level is likely to have on subsequent movements.
HOW TO USE THE MARABUZO LINE
50%
The primary use of this line is as a support or resistance line. Picture a downward Marabuzo; the close 100 pips lower than the open. The Marabuzo line will be drawn 50 points below the open (50- points above the close). The high and the low are not irrelevant as they may help to form a recognisable candle pattern but their importance is secondary. As it is likely that the next period’s open will be close to the previous close, the Marabuzo line is likely to act as initial resistance. Like all such lines it is only potential resistance. That resistance has to be tested and proved. Once that is done the line is likely to show continued importance. The same principle is applied to supports. A key point is that the support/resistance is applicable to the close of the period being used, not necessarily during the period. in other words trading during the subsequent period(s) can exceed the line but the line is not considered broken until the close of the period ( whether it be hourly, daily or even monthly). It must also be stressed that like all technical indicators, the Marabuzo
FX
line cannot be solely judged in isolation. Context is vital and so the likely strength of the impact of the line will be heavily influenced by whether prices are overbought/sold, at an important Fibonacci point, close to a trend line etc.
Of course if the ‘Support’ Marabuzo line does give way then sentiment should be expected to show increased negativity and the line itself will become ‘Resistance’ until it is supplanted by a new Marabuzo created by subsequent
FX TRADER MAGAZINE October - December 2011 33
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