Halfway retracement as a trend confirmation filter

The shared halfway question

The halfway level of a prior range is treated as the first support or resistance checkpoint after a reaction. The three-quarter and full-range marks are ranked next.

A reaction is a counter-move against an advance, scored by how close it comes to the prior swing's midpoint. A rally is a counter-move against a decline, scored the same way and further judged by whether volume participates. The shared question is whether the next counter-move recaptured half the prior swing.

Three methods, one checkpoint

Gann angles are a scaled halfway construction on a completed swing used to test whether the next move respects the mid-range of that swing. Fibonacci retracement supplies measured pullback checkpoints, especially the midpoint and three-quarter rest of a prior range, used to judge whether a correction is still a reaction or a new impulse. Support-resistance marks zones at swing midpoints and failed reclaims that either defend the old direction or force a fresh swing count.

The three constructions differ in how they are drawn. They still score the same event: did the next reaction recapture half the prior swing?

What counts as a swing and a trend

A swing is a directional run long enough to measure, treated here as roughly seven bars or more and typically shorter than about two months. A trend is a sequence of swings in one direction whose later corrections fail the halfway test of the preceding impulse. Moves lasting less than about two months are classed as swings rather than trends. Two- or three-bar candlestick forms are treated as too short to confirm a trend.

A pivot is a turning point marked when price changes by a material amount, here a 5 percent move, so noise is not counted as structure. Pivots are marked on a 5 percent price change, and only zigzags of seven bars or longer receive 50 percent midpoint lines.

How the midpoint is plotted

The plotted midpoint shifts if the swing is measured from the two pivot closes instead of from the extreme high of the peak bar. In the TradersWeek editorial reading, the measurement rule should be kept fixed for a given swing so the pass-fail test is not moved after the fact.

Whether a rally or reaction has participation is judged by volume relative to a 20-period triangular average.

Keep, restart, or suspend the hypothesis

Two successive downswings plus a later rally that misses the prior swing's 50 percent line are treated as the confirmation sequence for a downtrend. That sequence keeps the downtrend hypothesis in force because the later correction failed the halfway test of the preceding impulse.

A higher pivot peak without a higher pivot valley is treated as only a partial break of a downtrend. A second upswing is required before a long setup on the following reaction. Until that second upswing appears, the old swing count is not fully replaced.

A dip through the 50 percent line of the latest upswing is treated as evidence that direction is unclear and that price may be moving sideways. That is the point at which the trend hypothesis is suspended rather than forced.

A short final downswing is treated as a warning that downside continuation is weakening when a later rally becomes a full upswing and clears the halfway mark. Clearing that mark restarts the count on the new impulse instead of treating the bounce as a routine rally.