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3rdj and a second higher bottom from the week of August 13th. The square of the low price made in the week of June 11th, gives the week of November 26th. During this week, price is in the third week down from the November 5th top, and is two years from that previous swing high in 1980. This gives the third higher bottom in the price of the stock, and in the first week of January, 1983, the stock spikes down into the 45 degree angle drawn up from zero and the date of the June low, and shows support on that angle for a forth higher bottom. Now, Gann said to use the first higher low or first lower high to judge a cycle because what you may be looking at is the primary low or high at the end of the last cycle. The start of the new cycle may be from the higher low or lower high. I tend to look at both for evidence.

So, with this in mind, notice the high on the week of 11/25/83. This high is followed by some sideways movement, then a reversal week on 1/13/84, which is a very weak price movement. You would use cou ts from that week, also. It is a good place to count from, and a good place to draw angles from, because it could be the start of a new down cycle.

Follow the 45 degree angle down from the November high, and whenever it hits the level of a previous swing low, it squares the range of that high to that low, and can be considered a possible turning point. So, when that angle squares with the low of 45 1/2 in the week of 3/23/84, it could have been considered a turning point. You might have gone short. You wouldnt have made any money, and after the third week of sideweys price action, you would have to say, "I must be wrong because Im not getting a fast move, and that is what I am looking for with this technique." If you dont get a fast move, get out and walk away.

The reasons you wouldnt have taken this trade are numerous. First of all, prioe was not up for three weeks, a normal correction against a bear trend. Secondly, the 2X1 angle down from the lower high, which price had shown resistance at in February, and had broken to the up side, and then recovered in early March, had been broken completely. This indicated the end of the down move- at least tefflporarily. Finally, the low week that fell below that 2X1 angle down was 104 weeks from the March, 1982 low in the stock, and that is an excellent yearly cycle working out.

On the week of 11/26/82, the 45 degree angle up from the 6/11/82 bottom squares with the price of that low, which indicates that this could be a valid angle to work with. Now, price moves sideways into that angle and touches it on the week of 1/14/83. This is not a clear setup, so you would probably not trade based on this angle alone. But, if you look at the chart and count the bottoms that are higher, you will see that the low was in March was zero, the low in June was one (dont count it unless it is a low for three weeks, three days, or three months),

the low in August is number two, and the low in November is three. We know that a fast move will usually start from the third or forth higher bottom. When the 45 degree angle up actually came into play, it was the fourth higher bottom, and price gave an outside



reversal week up. This is a very bullish indication. At the time hit that angle, I would not want to buy. I would be looking for evidence that the angle was effective, and the outside reversal week up is the type of evidence that I am looking for.

On the monthly General Dynamics chart (Illustration 7.2), when the 45 degree angle down from the November, 1980 top reaches the prioe level of the February, 1978 low, a square of a minor range is shown, and although price has moved out of that range, it is still an important time. That square of range comes in, in time, January of 1984. November of 1983 was three years from the same top that is squaring out in range.

In fact, if you will count out from that high in weeks- for three years, or 156 weeks, you will get the date of the high week in this stock on the weekly chart. That high is, also, 52 weeks from the 11/26/82 low, and 13 weeks from the 8/26/83 low. The next week from that high in 11/25/83 is 90 weeks from the low in March of 1982. That is good evidence, and price moves sideways from that high. The monthly turning point is in January, from the squaring of the range, but this is still a good place in time to look for a short position for an 11 to 13 week drive down.

From the date of the 11/26/82 low, the 45 degree angle up from zero is broken in the first two weeks in January of 1984. One of the rules that Gann laid out was, when price breaks a 45 degree angle up from zero at a high price level, it means that the trend is changing. This is not to say that the trend from this point is down, it is juet evidence for a sell- an indication. Of course, this indication combined with the anniversary dates, a possible lower high, and the monthly turning point, is an excellent indication.

The next turning point we want to look at- on the monthly chart- is the 45 degree angle up from the March, 1982 low, crossing the level of the November, 1980 high. This happens in the month of May or June, 1984. From the square of the range of this low, to the high at 42 in January of 1980, we have March of 1984, and to the next high, we have the month of May or June, again. In March of 1984, support is shown at an old high of 42, and by June, price had gone above the level of another old high at, nearly 45, and broke the 2X1 angle down from the main high in November of 1983, indicating that the correction down was over.

Again, on the monthly chart, the 45 degree angle up from the low in March of 1984 crosses the level of the November, 1983 high in October of 1985, That is a good square of a range, from angles that have proven support. Moving to the weekly chart for that same October time period, we find that the full range from the high in the week of 7/19/85 squares with the low of the week of 4/12/85 in the week of 11/1/85. This is, also, the tenth square of the low from the week of 3/12/82. This is all good evidence to look for a change, and you might take a high risk, long position during that week. But, from the weekly chart, before you could be certain that the down move was over, the 2X1 angle down from the 9/13/85 high, the start of the fast move would have to be broken. Price does



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