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38

Now lets look at some squares of ranges on the Amoco weekly chart. The 1X1 or 45 degree angle that starts on 34 reaches the price level of 55 3/4, the price level from which the down movement started, and squares that price range during the week of 8/13/82. That range of movement from the week of 12/4/81, and a price of 55 3/4 to the low of 34 during the week of 3/12/82, took nearly 90 calendar days to complete. The range which squares out in the week of 8/13/82, does so during a week that is 13 weeks from the last high price in the stock, 90 weeks from the high price, and one year from the high on 8/14/81. There was ample evidence to look for a change in direction, and again, price showed support at very near the level of the previous low at 34.

When that same angle up from the low of 3/12/82 crosses the price of 64, it indicates the square of the range of movement from the 34 low to the 64 high. At this time, the week of 10/15/82, price had moved up to the 1X2 angle down from the high, and was up against the price level of 49 3/4 for the first time. This would be a good time to look for evidence of a change in price movement.

At first glance, 49 3/4 might seem like an unlikely price to stop an up move in Amoco. However, continuing with the Amoco weekly chart, and now looking at 50 percent marks and their effect on price action, you see that the high is at 99 1/2 and 50 percent of that high is 49 3/4. The first time price comes down to that support is on 6/5/81. You should know that when you are considering a position against a down move at fifty percent of the high, the first time againet that support level is the best time to look for a reaction up from it. Once that price level is exceeded to the downside by 3 points, the stock is in a very weak position. The first time price rose back up to the 49 3/4 level was in the week of 10/15/82 and immediately sold off 6 1/2 weeks. There was a second method of proving resistance at that price level during that week, and that was by taking the low at 33 1/2, dividing it by two to produce 16 3/4, and adding this result to the low price, yielding 50 1/4.

The next major fifty percent mark would be fifty percent of the range from the high to the low or 99 1/2 less 33 1/2 for a range of 66. Fifty percent of that range is 33 added to 33 1/2 is 66 1/2 or the fifty percent mark. Of course, two times the low of 33 1/2 is 67 and that is a strong resistance point. The first time against this level was in the week of 5/3/85. Price had a sharp reversal the next week and gave a 6 1/2 week correction down.

Gann emphasized that when a major support angle is broken, be sure to check for an old fifty percent mark which may offer support.

Now lets look at the square of the high on the Amoco monthly chart. The high was 99 1/2, and counting over 99 1/2 months, the 45 degree angle running up from 0 from the date of that high crosses the prioe of 99 1/2. The 45 degree angle running down from the top of 99 1/2 will hit 0 at 99 /2 months over from the top. Where those two angles intersect, which is 49 3/4, is fifty percent of the high price, or fifty percent of the square of the high in



price. The 2X1 angle from the top hits 0 on the date of 50 percent of the high in time, or 49 3/4 months over the top. This is the month of 1/31/85. As you can see, price was, also, at fifty percent of the high price, an obvious place for support. Price moved down into that time and price, and was, therefore, at a point to buy with protective stop 1 to 3 points below the 45 degree angle. (Illustration 6.2)

In my testing of these methods, Ive found that the square of the high becomes quite accurate when dealing with stocks in several bear trends such as the oils in the early 1980s, and other stocks that have moved below fifty percent of their highest price. You can see that Amoco did not go lower after the 90th week from its high week on the weekly chart (of course, 91 weeks is 1 3/4 years), and that by the time of the square of the high on the weekly chart, the stock has shown bottom and is beginning to rise. We saw that fifty percent of the highest price proved accurate, so look for the full square of the high on the monthly chart to be evidence of a significant change.

AMERICAN EXPRESS (AXP)

On the American Express monthly chart (supplemental material), the 45 degree angle down from the June, 1981 high crosses the level of the March, 1980 low in September, 1982. August of 1982 was the low month from a drive down, and produced an outside reversal month up. When September came, price moved up to the level of the previous high, and closed there, which was a point to expect resistance, so this square of a range, and the price action was misleading. It did not work. September was a year and a quarter from the previous high, and 2 1/2 years from the March, 1980 low, so there was ample reason to look for change. Of course, there was some evidence for August to be a point in time to look for a change. It was three years from the 1978 high, and seven years from the 1975 low, and five and six years from important dates.

Now, remember our rule that when price moves above the 2X1 angle down from top on a monthly chart, the down trend is at least temporarily over, that any short positions should be closed out, and you should be alert for buy setups on weekly and daily charts. Viewing the Aetna monthly chart and the fast moves down should show you the validity of this application of the angles.

The square of the range from the low in August of 1982 to the high in June, 1981 comes in the month of June of 1983. This was, also, 24 months from that 1981 high or the second square of 52 on the weekly chart (104 weeks), or 720 (730) calendar days, which is all the same measure of time, on different charts. If you look at the weekly chart you will see that the high week was 45 weeks from a low or 315 calendar days, which is 315 degrees of the yearly cycle. Gann said that you could look for top 45 days before the anniversary date, and you should do this, but add other evidence.



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