It begins with a centerline, drawn from a price peak to a price low. Then, a second line, parallel to the centerline, is drawn from a prior low. This is the action line. Next, a parallel line is drawn into the future. This line is an equal distance from the centerline as is the action line. It is the reaction line and is intended to identify future reaction points. Further action lines could be drawn, with accompanying reaction lines, that extend even further from the centerline (see “Daily view,” below).
“Weekly view” (below) is the same gold chart with the data converted to a weekly format. In this example, the reaction lines come in where prices make various high pivots. This demonstrates the concept that price actions and reactions are equal and opposite. Of course, if the reactions are indeed equal and opposite, then the reaction points also may be used to forecast the action lines.
Indeed, we could imagine that the action points could be found by drawing the centerline and the reaction lines first, appearing to validate a symmetrical understanding of time.