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vweak position from high and below fifty percent of range. We will let price tell us what to do. If price moves up through the angle from high, and above the 50 percent mark, leaving only a one day correction behind on August 14, then we will look to position long. But, if price goes down, then we will sell short and buy puts. The next day is a lower high, lower low and a close on the low. The next day- a lower high, lower low but a positive close and we establish support at 65 1/8. If that support is withdrawn then, we have valid evidence trend is down. Lets position short and buy puts on break of 65 1/8. The next day (August 21) we are positioned with a protective stop at 68, or slightly above an angle drawn down from the high of August 18. On August 26th, price rallies for one day, then down through fifty percent of last swing indicating a very weak position. We add to our shorts and puts on break of 63 1/4. We bring our protective stop down to 64 3/4. We get a one day rally off the old low on August 28, then down again, then a two day rally and down again through support on September 11.
Now, just so we dont get caught being bearish at the low, lets establish a reasonable price and time objective. From the April 7 low, 180 days is October 7; 90 days from high is October 3 through 7; and 30 days from the August 13, high is September 13; 45 days is 28-29. So the highest probability for a change in trend in time, is from the 29th through the 7th. In terms of prioe, the high at 76-77 gives vibration points of 72-68-63-60-56-53. From the first low in the drive down on July 14, at 67 3/4, gives 59 to 60, whith was the nest low at 90 degrees. We could expect a loss of momentum at the next low, if down trend were to end. So, 45 degrees is 55, which is the same way peak price was found from 72 to 76. So our objective is 55 to 56 then 53. On the 45 day cycle, price is at our price objective- 55 to 56- so we close out all or pa rt of the pos it ion. This uld def in ite ly inc 1 ude all the options and we move the protective stop to a few ticks above that days high for the remainder of our position. We are taken out the next day.
Since the normal intermediate term correction (countertrend) is 90 days or three months, the next strategy for trading this stock would be on the long side. Possibly looking for a low on the 30, 45, 60 or 90 day cycles, and with that severe down trend, we might expect some base building before a move up, and possibly the three to four higher lows setup for starting a fast move up out of that base. McDonalds did form a base in October, 1986, and then resumed its bull trend.
MCDONALDS WEEKLY CHART (MOD)
Look as the McDonalds weekly chart. We will see if it could have been of any help. The weekly chart can be analyzed very much like the daily chart for countertrend moves and weak or strong
position by angles and fifty percent marks.
Notice the correction that ended the week of January 24, 1986-three weeks down (normal countertrend), stopping two points above the previous high of July 5, 1985, and correcting in points less than the previous correction. When the high of that week, January 24, 1986, was exceeded, you could have said to yourself: "If that is a valid low then MCD is in a strong position for a fast multiweek rally."
Notice the high that occurred the first week in July, 1985. One year high to high was the time period we ware studying on the daily chart. A bearish workout of the one year cycle is high to high or low to high. A bullish vrorkout of the one year cycle vrould be high to low or low to low. Therefore, the 90 day (13 week) "blow off" was, also, terminating a bearish resolution of the one year cycle. In the first week of January, this wes a 26 week or 180 calendar day cycle from high.
Using the square of nine, 77 was one full cycle or 360 degrees from the July, 1986 high. It was one full cycle in time, as well as, one full cycle in price. Remember, fast moves come from false breakouts or breakdowns. So by the week of July 18, you would have known something larger on the down side was probable.
The one week countertrend rally, the week of August 18, started from 50 percent of the range from the September, 1985 low to high. Knowing in advance that price level of support, may have had us close out our short position and re-enter after only a one week countertrend movement became apparent. That low, at which we covered our short position based upon the analysis of the daily chart, would have been even easier to find if we had also used the weekly chart analysis. That low, at 55, was a bullish vrorkout of a one year cycle with a 90 day blow off terminating the larger cycle. It wes, also, 180 degrees in price on the square of nine, low to low. That was 360 degrees in time and 180 degrees in price. A classic set upl
SYNTEX DAILY CHART (SYN)
Look at the Syntex daily chart. Again, we are going to use this chart without the benefit of weekly and monthly charts. This would be foolish to trade from just a daily chart, but I want to emphasize the discipline necessary to be successful.
Notice, from the low on August, 1985, I have marked the higher lows. Remember, fast moves come from three or four higher lows. You could argue that the fifth low was really number four since the down day on
October 22, was not much of a correction. But when the lows on November 18th and 20th were set in with the gap up on November 21 and 22, 1985, you should have been able to tell yourself, "If this low at 35 3/8 is truly a low, then it is the 4th or 5th higher low and is giving a bottom well above previous highs. This is how
accelerations start. It is also 90 days low to low. I should buy it now."
From the lows I have drawn a trend line using a dash line. I have drawn a parallel trendline or channel from highs, also, using a dash line. This will be helpful as the low in November, 1985 was on the trendline. I chose Syntex as an example because it was in a powerful movement and I was personally trading this stock during this time period.
Now tnat we have bought at 37 to 38, lets get some price and time objectives, keeping in mind the powerful pattern that has started this movement, and the fact that we are only working from a daily chart.
TIME- Obviously a full one year cycle from the August 15th low plus or minus a few days- then May 14th through 16th for 270 degrees. It would be helpful if an obvious high or low comes in that time frame, as it would then indicate a 90 day "blowoff of the one year cycle. Of course, the 315 day cycle due June 30th could indicate a 45 day "blowoff" movement completing the one year cycle. From the low on November 20th, 90 days is February 20th, along with 180 days from the August 15th low due between February 11th and 15th. So if price goes up into mid February, my long position is at risk.
PRICE- From the low of 28: 90 degrees equals 34; 180 degrees equals 40: 270 degrees equals 46; and 360 degrees equals 53. Of course, there are other highs and lows yet to appear, which will help confirm or invalidate those numbers.
The first correction on December 5th and 6th was only two days down, and established support at 40 1/2. A good place for a protective stop would be 40 1/8. On December 30tn, price hits 180 degrees up- or 46, Thats 270 degrees from low and a correction of 45 degrees to 43, or 90 degrees to 40, is now possible, as time is, also, close to 45 days and 135 days. In fact, 135 days to 270 degrees is a harmonic relationship and is, also, aspected with a conjunction.
Lets sell half the position, taking 7 to 8 points profit. On January 8th, there is a sharp break that tiolds the previous low and then starts up on January 16th. This is exactly how I analyzed this situation during that time period. On January 16th, price moved up, out of what appeared to be a good base, so I moved my stop to just below that sideways move or 41 3/8. Price moved up three days, then stopped me out on January 23rd, hit an old low and 90 degrees from high and 180 degrees from low for a "normal" correction against an up trend, as well as, a trend line. We took an additional 3 3/38 profit. January 27th sees a higher high, higher low, and back into the previous sideways movement. Obviously now, that is not resistance. Maybe this was a typical horizontal consolidation that occurs often in a strong bull trend. We buy the next day above 43 with a protective stop at 41. Next, its one day down, then back up on January 31st. On February 7th, price tests the previous high at 46 and moves higher. But now my positions are at risk, again, with 90 and 180 day cycles, the
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