price move from one Large Quarter Point to another and the completion of
a Large Quarter are dependent on the success or the failure of the Large
Quarter Transitions. Every transition into a new Large Quarter always begins
at a Large Quarter Point that serves as a critical junction, marking the
end of a current and at the same time the beginning of a new Large Quarter
of 250 PIPs. Each significant price move starts at a Large Quarter Point
and always ends at a Large Quarter Point; therefore, when these important
price levels are reached, The Quarters Theory requires close examination
of the price behavior of currency exchange rates for signs of strength or
weakness that can be useful when attempting to forecast the outcome of
each attempt for a Large Quarter Transition and the direction of the next
Large Quarter price move.
The Large Quarter Points serve as constant and reliable support and
resistance levels. A Large Quarter Transition cannot occur unless the support
or the resistance of a Large Quarter Point is broken. The failure of an
attempt for a breakout above or below a Large Quarter Point is usually the
first sign of an unsuccessful Large Quarter Transition. Unsuccessful Large
Quarter Transitions are an indication that the currency exchange rate is
likely to remain in its current Large Quarter. When prices move higher and
manage to complete a Large Quarter but encounter resistance at the Large
Quarter Point targeted, there would be a greater probability that the next
Large Quarter move may be more likely to target the Large Quarter Point
below the Large Quarter Point that has served as resistance. The same is
valid for bearish price moves when currency exchange rates move lower
and produce a successful completion of a Large Quarter but encounter support
at the Large Quarter Point targeted. In such instances, there would
be a greater probability that the next Large Quarter price move may be
more likely to target the Large Quarter Point above the Large Quarter
Point that has served as support. Based on this premise, The Quarters Theory
establishes a set of two simple rules to identify signs of strength or
weakness in the price behavior of currency exchange rates in the vicinity
of each Large Quarter Point that may signal unsuccessful Large Quarter
Transitions:
Rule #1—Sign of Strength: Prices Sustaining
at or above a Large Quarter Point
This is the type of price behavior indicative of the unwillingness of the
market to see prices continuing to decline, diminishing the likelihood of a
breakout below the support of the targeted Large Quarter Point. Without
a breakout below a Large Quarter Point, there will be no Large Quarter
Transition of the currency exchange rate into a new 250 PIPs Range of
another Large Quarter below the current Large Quarter. A failed breakout
below a Large Quarter Point and a failed Large Quarter Transition cause
the exchange rate to remain within the current Large Quarter, normally
leading to a bullish price move in an attempt to complete the current Large
Quarter from the bottom up by targeting the Large Quarter Point above the
Large Quarter Point that has served as support.
Figure 2.1 shows a bearish price move in the GBP/USD pair’s exchange
rate, completing the Large Quarter 1.4500 to 1.4250 by reaching the Undershoot
Area/Small Quarter 1.4275 to 1.4250. Note that prices come short
of and never touch the exact number of the Large Quarter Point 1.4250,
diminishing the probability for a breakout below the Large Quarter Point
1.4250. Prices sustain above the Large Quarter Point—a sign of strength
that causes the exchange rate to remain within the current Large Quarter.
The lack of a breakout leads to an unsuccessful Large Quarter Transition
into another Large Quarter below the current Large Quarter 1.4500 to
1.4250. The unsuccessful Large Quarter Transition below the Large Quarter
Point 1.4250 is followed by a bullish price move in an attempt to complete
the Large Quarter from the Large Quarter Point 1.4250 that has served as
support, targeting the Large Quarter Point 1.4500.
Rule #2—Sign of Weakness: Prices Remaining
below a Large Quarter Point
This is price behavior that signals exhaustion and lack of strength in a
price move, reducing the likelihood of a breakout above the resistance of
the targeted Large Quarter Point. An unsuccessful breakout above a Large
Quarter Point would indicate an unsuccessful Large Quarter Transition
into a new 250 PIPs Range of another Large Quarter above the current
Large Quarter. As a result, prices would be likely to remain within the
current Large Quarter, normally leading to a bearish price move in an
attempt to complete the current Large Quarter from the top down by
targeting the Large Quarter Point below the Large Quarter Point that has
served as resistance.
Consider the example in Figure 2.2, which shows the GBP/USD pair’s
exchange rate moving higher, completing the Large Quarter 1.4750 to
1.5000. Note that although the Large Quarter is completed successfully,
prices remain below the Large Quarter Point 1.5000, a sign of weakness signaling
exhaustion and reducing the likelihood for a bullish breakout above
the Large Quarter Point 1.5000. As prices stay below the Large Quarter
Point 1.5000, the exchange rate remains within the current Large Quarter
1.4750 to 1.5000. The lack of a bullish breakout above the Large Quarter
Point 1.5000 leads to an unsuccessful Large Quarter Transition into another
Large Quarter above the current Large Quarter 1.4750 to 1.5000. The unsuccessful
Large Quarter Transition above the Large Quarter Point 1.5000
leads to a bearish price move in an attempt to complete the Large Quarter
from the Large Quarter Point 1.5000 that has served as resistance, targeting
the Large Quarter Point 1.4750.
Read More: ANALYZING PRICE BEHAVIOR AT THE LARGE QUARTER POINTS
