back start next
[start]                                          [ 42 ]                                                
r> p- f~ K~E t R R ? ff 5 S E ?* R fc - . .
>.v"vV"s.v,v,v.vV4iv4.4iV vvv s.v "-v -N. -V "v "v --.s < < <J < " ] " V 7" " T T T* T T"
for resistance to a move up at this point, you can add the fact that this is the third lower high, and fast moves often come from third lower highs and third higher bottoms. The resulting fast move down breaks through fifty percent of the high on the 13th week of the move, finds support during the 14th, and price wanders sideways just below fifty percent for 7 weeks before breaking the resistance level and falling. From that low week of 4/27/84, to the low in the week of 7/27/84, is 13 weeks. The low was found at 3/8 of the square of the high.
On the Control Data monthly chart (Illustration 6.7), the high is 64, and the square of that high in time is shown by the 45 degree angle moving up from zero, from 6/30/83 and crossing the level of the high. When this angle intersects the 45 degree angle drawn down from 64, it is at fifty percent of 64 or 32, both horizontally and vertically, or in both price and time. So, these price levels and time periods become important in any analysis of the stocks price action.
Returning to the the Control Data weekly chart. As to significant price levels, there are four areas. First, there is the division of the square of the high, fifty percent of which is 32, and 3/8 is 24. Youll notice 24 proves support twice for significant bottom- 7/27/84 and 6/21/85. Once those bottoms were broken on 8/16/85, the first move up against those bottoms or the 3/8 level would offer resistance, as happened from 8/30/85 through 9/6/85. So the square of the high gives 24 and 32. The square of the last range of the movement from the week of 2/8/85 through the week of 10/4/85 has fifty percent of its range at a prioe of 27. Also, 27 is 1/4 of the major range, which you could locate by extending the 1X4 angle from the bottom hit on 10/4/85 out to the end of the square on 9/10/86. In addition, you can see that 50 percent of the major range is at 40, whioh you can find by following the 1X2 angle to the end of the major square.
From this we know that the first movement against 40 would be a point to go short, an ideal point to go against the move up, and one of the highest probability resistance points youll find on the chart. Since the low on this stock, or current low, is 15, and 100 percent of that low would be 30, which would be a resistance point, also. The idea you to take from this is, to project into the future, using significant highs and lows, their divisions for support and resistance, and the cycle of the years as evidence for positioning in trades.
Lets go to the Disney charts and do some normal chart reading looking at the normal cycles. Start with the daily chart and please cover up "Future" price action so that you can get a better grasp of the movementa (supplemental materials). Starting on 9/16/85, price rallies 5 days and then corrects for 5 days into a rising bottom. On October 7th or 8th, price moves sideways and
then up for seven days, moving above highs going back to July. Price then moves down for seven days into 10/28/85, for a third higher bottom. A fast move starts, going up 11 days and then moves sideways for six days holding well above the previous consolidation of late October. This is very bullish, and the low volatility shown is, also, bullish.
At this point, the maximum correction down has been seven days, and the first was a five day correction. The next correction, on 11/26, is only two days down with another rising bottom, which is again bullish. Notice the space between the low and the previous high, followed by a move above the previous high. The next correction down is two days into 12/3/85, leaving still another rising bottom.
Price could be accelerating, and, if so, corrections will only be two to three days. If blowing off occurs, corrections would be only one day. The next correction is two days of sideways movement and then price moves up strongly. On 12/12, there is a one day correction, and then a two day correction into 12/18, and finally a three day into 12/26. Price moves up for seven days and then another three day move down. The next move is up seven days, with a reversal day on January 8th. There is a loss of upward momentum, at that time, which you oan see by simply drawing a trendline from the three previous highs. This indicates the possible start of a correction or consolidation. The three day correction down is normal, but then two days up stops the move, and price moves down for seven days into January 23rd. We know the next time period for a oountertrend move is seven to eleven days.
In the move down little damage was done and the correction ends on the 7th day, which was, also, the longest of the corrections in the drive up. In addition, it was within a point of the largest previous correction. Price moves up for two days and leaves, yet, another rising bottom. There is a one day move down on January 30th, and another one day move down on February 5th, leaving a double bottom consolidation. Now there is a gap move up, and the move lasts for 7 days looking very strong into a two to three day correction on February 20tn, 1986. This is a normal correction again, and the stook looks to be accelerating. Again, price moves up until there is another three day correction into March 11th, and then three days up, fails to take out the previous swing high. This indicates a possible correction or consolidation. This takes the same form as the previous bullish consolidations and from the one day correction on March 21st, another fast move starts, which again gives a two day correction into April 2nd.
The next day is up, the following down, and this continues for five down days, which is still within the normal pattern of consolidation. On April 8th, there is a wide range gap move up to new highs followed by another gap move. No correction results, just a sideways pattern as happened on December 6th, 1985, and is very bullish. A big blowoff move follows- eleven days straight up.
Notice the top in early July, 1986 had a 45 day blowoff move up into the 90 day cycle and the 270 day cycle.
[start]                                          [ 42 ]