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25 against any support or resistance zone is the dangerous time. It could go either way. If price fails on the third time against a support zone, a fast move will occur very often. You could have been prepared to take that trade here. Lets move on to the United Technologiess monthly chart (Illustration 4.2). This stock hits fifty percent and shows support, then moves through fifty percent of the high in time, and corrects down into the 45 degree angle up from zero. It is above the 45 down from top and in a strong position. You would be looking to buy this stock when price came down to that angle. That is the key. Buy when price reaches the level of the proven angle. You can use that in a down trend, also. Sell, when a proven resistance angle is touched. The 1X2 or slow angle from the low on this chart provides the support for the move up. Many of the bottoms fall on that angle. When that angle has been proven, that is support has been shown, then you want to pay attention to it. If you draw a 1X2 up from the top in Uune of 1983, you have a channel, and the first time price exceeds the upper side of that channel, it corrects back down. Notice, during the October, 1987 crash, how support was found at fifty percent of the August, 1987 high. At the time of the crash, the lows of many stocks were at fifty percent of the high. In summary, the combination of angles and squares oan be a very powerful method of determining when to trade. The best use of this is to find an exceptional setup from the monthly charts, and then go to your weekly charts to determine the week to trade. Find the most likely turning point week. They are often very clear. You may have a setup with time being 45 weeks from a top, 13 from a bottom, and a square of a range or fifty percent of a square, or a similar oombination. Then go to your daily chart and find the most likely daily turning point within that week. When you find that date, you can either take the trade on that day, or set up a price activation to put the trade in, and let price prove the setup before trading. If you have the discipline to restrict your trading to that type of setup starting with the monthlies and then migrating to the weeklies and dailies, you will probably exceed 80 percent accuracy in your trading.
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SQUARE OF THE LOW The square of the low is a significant time period to add to other evidence in looking for change. Lets say that a stock has a low of 13. When thirteen months from the time of that low is reached, it is important to look for evidence of a change of trend in that time period. This is especially true if the price is back at 13, since price would be against the 45 degree angle from zero. I use the square of the low for two major purposes. The first is for finding the timing from a significant low. The second is to look for resistance at 1 1\2 times the low, and 2 times the low price and so on. If the low is a high number, over 90, then I will also look at geometric divisions of that number. If the last low was 20, and price is moving up from that low, resistance should be present at 30, and then again at 40. This is somewhat simplified, but you can use multiples of a low price to look for price resistance, and multiples of the low price in time to look for time resistance. Look at Illustrations 4.3, 4.4, and 4.5. These are of the S&P 500 Cash Index. The significant low in August, 1982 is 101.44. The squares on these charts are the square of the 101.44 low. On Illustration 4.2, Point (A) is 1\2 the price and the full square of time in weeks (July, 1984). On Illustration 4.3, Point (B) is 1 1\2 in time (July, 1985), and Point (C) is 1 1\2 in price and the 2nd square in prioe (July, 1986). On Illustration 4.4 Point (D) shows the 3rd square in price (April 1987). These points by themselves may not have been obvious points to trade. But if you look at the daily charts, youll see obvious reasons in time to look to trade and by adding this square of low to the analysis, you would have been very encouraging. The 1st, 3rd, 4th, 7th, 9th and 12th squares are the significant squares of lows but all should be monitored. Again, the squares of the low should be used with other timing techniques. One obvious setup is to have price at three times the low in both price and time. So, that in the above example of an item, with a low prioe of 20, the prioe of the stock would be at 60 in the 60th week or month from the low. Of course, 60 months would be a five year cycle.
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