UlwkiM ** S#l»ct»d anqU* * Sc: 1 Bp*

>

830611 » 10 9 830318 >30>05 831333 »40511 8*0938 850315 850705 851133 »11 860839 870116 870605

Illustration 3.7

NAME

Inc.

SQUARE OF THE HIGH

For the square of the high, you use the highest price which the stock, index or commodity has attained. If the high is back in the 1960s, and you have lower highs in the seventies and eighties, use the most recent high in conjunction with the highest high in 1960. Dont try to use half a dozen highs and their multiples, as it will be confusing. However, you should watch all squares of highs and lows and ranges as they square out for the first time, or as one half of their square comes out for the first time. These are important time periods for all markets. I will add to this by saying, if you have any significant high or low, the highest high, or the lowest low, in any decade, or even any five year period, you should watch the multiples of the high or low price square out in time, and be aware of it. If they are exceeded by a new high or low. they become less important in price squares (but they are still important on the cycle of years basis).

On a monthly chart you will find that when the square of a high comes out in time you are generally looking at the end of a bear move. If that high price hasnt been exceeded, then price action can be qualified as bearish inside of that square in time. The same is true of the weekly chart. If you have a situation where the price action doesnt go into a severe bear trend and stays above fifty percent of the nigh, then you may see a new high within the square.

As far as trading is concerned, if you are short a stock, and price comes down to fifty percent of the high price, you may want to close out your short position. Very often that price level will stop the move. That does not mean that when that prioe is reached you should go long without first doing a complete analysis. If price moves through fifty percent of the range, the next stop is usually fifty percent of the high.

You should always know where fifty percent of the highest price is. Mark it on your oharts, because it will come into play some time in the future. Also, it is very important to draw angles up from those fifty percent marks.

When price breaks fifty percent of the high price, it can be qualified as in a very weak position, and you should be very careful trading from the long side. And, if the market trends down after that break, then the first time price comes up to that level, it is a high probability short sale.

The square of the high is important in time always, but the divisions in horizontal price support become especially important after price has broken through 50 percent of the previous range of movement. In other words, use the square of the major range for price support levels until fifty percent of that range is broken, then use the square of the high, price support levels. The square of the high has its best application in severe down trends. But if a market comes down from a high with a large correction, and the low and subsequent counter trend move are exact divisions of the square of the high, then you have a very good indication of a