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was, also, at a 135 degree aspect from time. I went short that day and covered at 26 points down whioh matched the previous largest movement down. The August, 1987, high was, again, obvious, especially with five year and seven year cycles expiring. When price dropped below the 45 degree angle from the August nighs on October 15th, after having been above it for sometime, it put price in a very weak position and a waterfall move down was probable. Notice on the weekly chart, the week of November 18, 1988, when price broke 274, it moved into a very weak position from the August high and gave a fast move down. I was short going into that point, added to my position and covered the shorts at 21 points down, again, matching previous corrections.

Lets stay with the weekly chart. Notice the movement into the November, 1988 low. All higher highs, higher lows and corrections from highs were almost equal in number of points. Then in March something very important happened. Price exceeded any previous move up in points. If the low at the end of March was, in fact, a low for the next drive up, the correction would be significantly less in points and would for the first time bottom above a previous high. This would indicate the start of a "blow off" to the upside, moving at least 360 degrees from the 283 October high or to 354. This is an unusual pattern on a weekly chart, however, occurs often on a daily chart and usually starts a 90 day "blow off" cycle from the last low. Remember "blow offs" are tremendous opportunities since the last few countertrend moves are only one to three days followed by large thrusts. Notice the lower high in October, 1987 was 540 degrees in price and time from the April 7, 1987 low, and of course two years or 720 degrees in time from the 1986 low. Notice, on the weekly chart how highs in 1987 are first 270 degrees high to high, then 180 degrees high to high, showing a loss of momentum. Now look at how this latest "blow off" has been 135 degrees low to low and also how highs have been running high to high on the square of nine.

Before reading further, you should finish this exercise by going through the remainder of the S&P charts, again, covering up the future price action with a piece of paper, working with daily, weekl a nd monthly cha rts. I ca nnot empha size enough, how important this exercise is to understanding how markets move. This exercise is the same as a baseball player taking batting practice or a professional golfer going to a driving range. You as a trader must practice your skills just as a professional ball player practices his skills. Every weekend I take a set of charts and go through a similar exercise. If you are going to have a high batting average and hit home runs in this game of trading, you need to practice. Now lets look at some stocK charts.

McDonalds Daily Chart

Look at the daily chart of McDonalds Corp. You will find it in the materials which came with your book. Again, we see a 90 day

cycle low to high, this one-one hundred and eighty degrees from 60 7\8 which equals 77. Price hits a high of 76 3\4. How could you position against this movement? If shorting the stock, you would put part of your position on a 76 1/2 or better, with a protective stop above the digit 78 or 78 1/8. Then short the remainder upon breaking the low of 74 7\8 (the

first sign of weakness). In this instance, that might have been a little difficult since there may have been few up ticks. If positioning put options, they would be purchased simply upon breaking the 74 7/8 low. I would recommend buying in the money so a protective stop, which could then be lowered to just above 77, would not be too large a loss to capital in the event the trend was not down. Notice on the spiral chart, 72-73 is 45 degrees from the high. In an up trend, the first 45 degree price level can produce a higher low, or, in the case of a down trend, a lower high as with McDonalds.

So, now that we are short, what are our objectives in both price and time? First we want to watch 45 degrees down from the high, or at 72-73, and at fifty percent of the range or 72 1/4. Both are near the same level. The next place to expect support is at 90 degrees down or at 68-69, which could hold the up trend, then the old low of 60 7/8 which is 180 degreea down. But time is the most important factor, so we will look at the closest objective in

?rice as the time cycles expire. The low was April 7th, 1986, but he 7th was a Monday, so Saturday the 5th or Sunday the 6th could, also, be the start of this cycle. The 120 day cycle from low could be the 5th through the 8th, and since the low was aepected by 90 degrees from price and the high was in opposition price to time, we can assume the other angles to be very strong in both time and price. When high is found on a 90 day cycle there ia a probability to find low on the 120 day cycle (30 days down from the high) or square to trine. So lets follow the price movement now. There is a high on July 3rd, then a down day on the 7th, the 8th day-lower, and price goes through 45 degrees or 72 which was, also, through the previous high at 72. Then, it took three days, to consolidate the large down movement and a further day down to 62 3/4,

followed by an inside day on the 15th. Next, it breaks the 50 percent mark and, then, recovers it. July 17 is the first rally day (higher high and higher lew).

We know that a countertrend movement could be three to five days. However, its more likely a maximum of three days since price is in a very weak position, i.e. below the fast angle from high and has broken below the previous highs. So we have resistance in time fcr another day or two of rally, resistance at 50 percent of the range or 72 1/4, obviously the angle, 45 degrees down from 76 3/4 or 72 (not to go into the digit or 73). Since the high came in so precisely, lets keep our protective stop at break even and assume that the trend is down. The next day is an inside day. The following day, July 18th, puts some fear in our minds since price moves above two of our resistance levels, even though it stays below 73. Price fails to hold above resistance by the

close. That was the third day up. Price, then, broke the fast angle and dropped back below it (a possible sell indication). So, lets move our protective stop down to slightly above 73 or 73 1/8 and add to our short position upon breaking the low of 69, which would, also, be breaking the 45 degree angle from low, on July 14th. That break could bring in a much larger drop since price is in a very weak position from high (below the fast angle or 1X2). Then, if price broke the fifty percent mark at 68 3/4, it would be in an extremely weak position. The next day, July 21st, price gives small range but the high comes in exactly on the angle. Next day, the high is, again, on the angle and breaks support. Therefore, we add to our position. The next day is down again, followed by a small range inside day. Then there is a one day rally on July 25th, and down again on July 28th. Since all price could manage was a one day rally, we must conclude that the trend is down hard. Lets bring our protective stop down to a little above the last swing high or 67 1/8.

As pointed out earlier, the cycles to bring in change, due to the low and high coming on Mondays and Fridays, could be from the 4th through the 7th. So lets not get greedy. From the low of 68 on April 14th, 180 degrees down is 60-61, 90 degrees down is 60. Sc lets move our protective stop a few ticks above the previous days high and close out shorts at the old low of 60. We are taken out of our position on the 4th, prioe moves up on the 5th, then breaks 60 on the 6th. Remember, fast moves come from false breaks of obvious support or resistance levels, and 59 makes the low of 67 3/4, a 50 percent mark, and, thus a projection. Remember, important highs or lows oan become 50 percent marks in the future. On August 7th, price moves above the previous days high. But price is etill in a very weak position even though the low came in on our time cycle. The next important time cycle is 45 days from high on August 19 through 21. The next important resistance is 68 or fifty percent of the range down, which is, also, the old low on July 14th. But if this stock is really weak, this drive up should fall short of that objective. The next day price gaps up significantly above the close and above the high of the previous day. We could trade it here for a few points since our protective step would be very tight or 1/8 belcw the days low of August 8th. If you were prepared on the 8th for that type of movement, you could have bought near the close, or definitely, with the gap up Monday. On August 13th, price gaps up, again, but closes weak. Lets move our stop up to the low of that day, as the gap could be an exhaustion move and price is still in a weak position from high and belcw a 50 percent mark. The next day we are out with a small trading profit. Next day is inside day, with the following day, August 8th, with-say a higher high and higher low. Now we have a dilemma. Was the 14th a one day countertrend movement in a fast move up, or is the 18th a one day rally or countertrend move in a fast move down? The 45 day cycle indicates that the highest probability is that price is at the end of a countertrend movement up and a resumption of a larger move down as price is still in a

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