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These are excellent advances； but they are still not enough to provide a successful； reliable； and consistent approach to trading。 To ensure success； we need one more major enhancement； and that constitutes。the third leg of this。three…legged stool of Drummond Geometry。
It is。not enough to know where support and resistance lie in the near future。 We must also know whether that support or resistance will be strong or weak。 If it is。strong； it will hold； causing the market to change direction and turn back； if it is。weak； it will break。and give way； letting the market proceed farther in the same direction。
Determining the relative strength of support or resistance is。a bit of a dilemma because there is。nothing on the conventional single time period chart that can tell a trader if resistance or support will be strong or weak。 And yet this。is。often the most important information a trader could have； because it monly is。the determining factor in deciding direction。 If a trader has。a firm handle on direction； then many of the other challenges。fall into place and steady success。is。achievable。 So if there is。nothing that can be derived from conventional charting to provide this。information； it must e from another source。 In Drummond Geometry； that source is。the chart of the same symbol viewed in a larger time resolution—a longer time frame—than the trading chart。
If； for example； the market has。been trending upward in an hourly chart and the trader thinks。it may turn around and enter congestion； he may indeed be correct。 But without additional information there is no way to confirm this。suspicion until after the market has。made its。move。 However； if the trader places。the hourly chart and its。projected future support and resistance within the matrix of the daily chart's。projected support and resistance areas； the context bees。clear。 If the trader can see that hourly resistance has。reached the anticipated daily resistance and daily resistance is。anticipated to be strong based on the daily's。position within the weekly。and monthly。matrix； then he can take action with about three times。the confidence that would otherwise be warranted for this。trading situation。 That's。a huge advantage。
Figure 1。5 shows。the same USDJPY Forex monthly chart that is。featured in the first four figures； in which each bar represents。one month of market activity。 But a new element has。been added； namely the support and resistance areas。from the quarterly。USDJPY chart。 These areas。are represented by the thin white lines。behind the price bars。 To make the last two quarters' support and resistance areas more visible； I have made them gray。blocks。 Note how useful this。can be。 Not only do we see where the projected monthly。support and resistance are； we also see the projected quarterly resistance overlaying the monthly chart。 With this。information； we can see that for the last bar of this。chart； which represents。the month of October 2006； the high formed above the month's。nearby resistance but exactly at the top of the quarterly resistance。 A Drummond Geometry trader looking at this。chart at the beginning of October would have a strong indication that selling at that point would be a very good idea。
Applying Drummond Geometry to a Long…Term Forex Trade
I suggest that charts。from all time periods。have similar patterns。that occur and reoccur； and all time frames。are related。 In other words； a market top on an hourly chart will of necessity be reflected by a market top on the five…minute chart of the same symbol。 Traders generally recognize that it can be useful to look。at hourly charts。and daily charts。of a market； although the techniques。of coordinating the time frames。may not be widely understood。 But it is。a rare trader indeed who understands that the patterns。in long…term charts。such as monthly； quarterly； yearly； two…and…a…half…year； and five…year charts。are all similar and can be profitably included in the trader’s。analysis。
If I were to show you a long…time…frame chart but without the time designations。on the horizontal axis。or the price designations。on the vertical axis； there would be nothing to indicate whether you were looking at a fifteen…minute chart； an hourly or a daily chart； or a weekly or monthly chart。 By now you can guess。where I'm going with this： it could also be a quarterly chart； in which each bar represents the market activity in one quarter； or a yearly。chart； in which each bar represents。one year's。market activity； or an even longer…term chart； in which each bar represent is。two and a half years' activity； or five years'； or ten。 On each of these charts； we can see trends； congestion； types。of trading； dot pushes； terminations； and so forth。 And on each chart the support and resistance levels。can be projected into the future。
Why is。this。useful？ A moment's。reflection will make that clear。 If we can project resis…tance and support on a yearly basis； then we have an advantage in predicting and monitoring market turns。in those areas。 It； for example； we can determine the market's。yearly high or low in a major Forex market； then we can potentially take advantage of long…term moves。with immense profits。built into them。 In the currency markets； with the eye…popping 400…to…1 leverage available even to small traders； very large profits。are available。
Let's。lake a look。at some charts。and analyze these yearly charts。and their shorter time frame ponents—for it is。on the shorter time frames。that we will first see the evidence of the yearly low or yearly。high setting up and terminating energy in support and resistance。
In the tool chest of Drummond Geometry； there are concepts。that can be used to structure many different kinds。of trades。 I will detail one entry signal here as。an example； so that we can follow； a sample trade on the long…term chartsing up。 In Figure 1。6； we see a daily chart that shows。what we call an 〃exhaust〃 and the entry signal that follows。it。 An exhaust is。a market move of very high energy that breaks through nearby support or resistance and then reverses； much like a column of water in a fountain that has。been pushed up and then tumbles。back。on itself when the energy that pushed it up can no longer hold up the weight of the water。 For a trader； the challenge is。to identify that exact moment when the push that sends。price in one direction or the other has。exhausted itself and the retracement has。begun。 Drummond Geometry offers。the technical tools。to identify this phenomenon。 In Figure 1。6； we see this。pattern： First the market breaks。the nearby support level and the bar closes。in that area。 Then； in the following bar； the nearby support area holds。and does。not break。 This。pattern is。an 〃exhaust buy〃 signal； and we will see many。examples。of this。signal in the following chart analysis。
In Figure 1。7； we see three price charts。of the USDJPY； which show how Drummond Geometry sets。up time frame correlation。 The support and resistance areas from the longer time frame chart are overlaid on the chart of the next shorter time frame。 The left…hand chart is。a two…year bar chart； in which each bar represents。two years。of activity。 The large arrow shows。how the nearby resistance for that bar is。overlaid onto the chart to the right； which is。a one…year bar chart。 On the one…year chart； the two…year resistance is。plotted as。light gray…bars。positioned behind the one…year price bars。 Similarly； the nearby resistance and support areas。from the yearly chart are overlaid onto the quarterly char I on the right…hand side of this。figure。 At this。point； it bees。clear how thisrrelation of time periods。can be graphically represented。 I have also shown on this。yearly chart an exhaust buy signal； which occurred in the USDJPY at the very beginning of 2005。 Although the time frame is。radically。different—one year bars。in Figure 1。7 versus。the daily bars。of Figure 1。6—the technical pattern of the exhaust trade is。identical。
In addition to the buy signal in Figure 1。7； I have marked two target areas。for this。long…term trade。 How do I establish these areas？ According to Drummond Geometry theory； the market will move from resistance to support； and when it reaches support； it will move back。to resistance； and that pattern will occur in all time frames。 Resistance and support will either be weak。and break。through to a secondary level of resistance or support； or they will hold and be strong； kicking prices。back。in the opposite direction。
If we have a yearly low； then what is。the target for this。currency？ Where can we expect it to go on a yearly basis？ The yearly target； like targets。in other time frames。in Drummond Geometry； depends。on where the market is。when it starts。
If the price starts。from：
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far above the envelope； then the first target is。the envelope top
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at the envelope top； then the target is。the other side of the envelope； depending on what happens。to the PLdot
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inside the envelope； then the target is。the other side of the envelope or lower
In the case of the yearly chart in Figure 1。7； because the close of the price bar for 2001 was。near the envelope bottom as projected for 2005； the target for 2005 will be the PLdot； and if that breaks。and the market continues。to the upside； then the secondary targ