Pretty straight lines on pretty white charts are often pretty...inaccurate.
If you are merely concerned with short-term support and resistance, those pretty charts can be great. However, if you're interested in the medium or long-term support and resistance levels, pretty ain't gonna cut it.
The challenge is attempting to depict three-dimensional (and beyond) price action on a two-dimensional chart.
Growth of price occurs in a spiral and we know that prices expand and contract. This occurs in cycles that may or may not be easily apparent.
So, when the all-so-neat chartists draw those pretty straight lines from price A to price B they are, more likely than not, viewing price action as taking place in two-dimensions.
Then there are all of the various rules and patterns that chartists love to follow. Those rules and patterns all have their useful function - until they don't.
A more fundamental problem with two-dimensional charts is they create the impression that time and price occur on a flat plane. But, time isn't a straight line - it's more than likely some type of curve. Price doesn't just move up and down - it spirals, and likely is doing much more.
So most of what you see on price charts represents a construct that works in many situations, but utterly fails in others because it so poorly represents what is really going on.
Take the above chart as an example. There are two lines we are concerned with which are pointed out by the arrows - one line is green and the other is purple. Those lines are Pitchfan (combination pitchfork and Gann Fan) lines. They mark the point where the gold price started to dramatically break down in 2013.
Pitchfan lines represent the edge of the price spiral
Image Pixabay
Those same lines represent resistance today. Pitchfan lines aren't cute little straight lines drawn from Price A to Price B. They are more like representations of the edge of the price spiral. Another way this could be viewed is as expanding or contracting energy levels of cycles.
Regardless, the important thing to consider is that resistance lines that work over the long-term aren't just lines that connect Price A to Price B. Price breaking through one of those pretty lines drawn from price to price on that clean, white chart often sees price "mysteriously" turn lower.
Yet, looking at the Pitchfan lines on our chart, the current price reversal doesn't appear "mysterious" at all. In fact, it's not really all that surprising at all, and it was done without the "benefit" of those pretty straight lines connecting point A to point B on a magnificently white chart constructed as an ode to two-dimensional construction of price action occurring in the third-dimension and beyond.
Chart Analysis uses a combination of technical analysis and cycles to provide insight into the future direction of precious metals, currencies, stock indices and more.