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excellent place to buy.
Of course, the idea with this is to show the value of the nnonthly charts and use of Ganns methods. Once that 2X1 angle up from the August, 1982 low is broken, you should be out of any long positions, if you were not beforehand. You will, also, notice that price finds support from the correction down, that ensues after the break of that angle in January through February of 1984 at just below the 45 degree angle up from the February, 1982 low. In addition, there is a 2X1 angle up from zero, and the date of the November, 1981 low, at the same price level. A small break and then a recovery of those two support angles. Price has already shown support at this level for the two previous months, and June of 1984 does have some prospects for a trade on the long side, just from the angles.
That bottom on June of 1984 came in against the 45 degree angle from the low, a live angle, and the 2X1 angle up from zero. Fast moves start from fast angles, and June is 90 months from top, with support being shown by four monthly bottoms within two points of each other. The sideways move into that faet angle is a good buy. Prioe moves up for three months before it is at the level of the old top, and then the move looses momentum.
In December of 1984, there is a ten year cycle from the December, 1974 bottom, and beoauee prioe was moving up into that time period, this would give you the poseibility of a top at this point. So, here ie a ten year cycle from bottom to top. In addition, price shows support on the 2X1 angle coming up from zero, and stays at this top for three months, before price breaks that angle in March. This is a good indication that the drive up is over. Breaking a fast angle of eupport at a low level of price is not very significant, but breaking it at a high level is.
Actually, this top has a nice looking, buy setup. Price is at the old top. There are three months of lows at the same price, whioh would be a triple bottom on weekly charts, or a double bottom, and price moves sideways into a proven support angle. Usually, when a etock breaks to a new high, it will take off up, but in this case, being at a ten year oyole, you would have to be cautious. Even so, you might buy that angle for a three month move up. You are not going to be right all of the time, and that is why you use a protective stop.
If you buy these kinds of setups, you oan get very good gains. The idea is to just look for the setup, such as support on an angles like the ones in April of 1983, the low in June of 1984, and othera. Hold your atocks or options for three months, and you have an eaey way to trade. Alwaya remember to use stops.
Lets look at another setup which doesnt work exceptionally well. The full square of the high comes out in the month of July 1983, and price is near the old top, and in a strong up trend. This time period is important, and because price was moving up, you would be looking for top. Assuming that a short position was taken in July of 1983, for a three month move down (which did not happen), your protective stop would have been moved down. You
would end with a profitable trade, although, this correction probably only lasted for about one half of the normal 90 calendar days- 45 days. You see that it doesnt work perfectly all the time, and why you must remain disciplined.
Of course, this is all looking back at price action, but you can look forward to see good times for trades. On the GM chartj you can see that 60 months from the February, 1982 low is February, 1987. In January of 1987, we are two years from the January, 1985 high. In either January or February, the range from that January, 1985 high to the June, 1984 low, squares out. Also, one half of the range from that January, 1985 high to the low in February, 1982 squares out in February or March. I am going to be watching that time period in this stook for a good turning point and trade. The key to the direction out of that time period is, how price moves into it. In general, the time turning pointa are changes in trend, the beginning of corrections to the trend, or the end of corrections to the trend. So, if price moves down into the period, you oan be looking for a long position, and visa versa.
Before you leave this chart and go on to the next one, take a look at the squares of the multiples of the low of 1974- at 29- and what occurs during those months.
Now to Merrill Lynch. First, we will look at the square of the high on the weekly ohart. The 45 degree angle from the top on 7/8/83 hits zero on 8/10/84, which ie, also, 56 1/2 weeks from the top and at a price of 56 1/2. The 45 degree angle from zero and the date of the 7/8/83 top hits the 56 1/2 prioe level during the week of 8/10/84. Thus, the corners of the square are defined by the high, zero on the date of the high and where the 45 degree angles up from zero and down from the high croes the level of the high and hit zero, respectively. (Illustratione 8.0 & 8.1)
Since these charts are square, or geometric charts, where the 45 degree .angles down from the top, and up from zero on the same date intersect, wa have fifty percent of the high price, in both price and time. This is the week of 1/27/84, and a prioe of 28 1/4, In other words, on the weekly chart, fifty percent of the price level of the high is 28 1/4, and in time, fifty percent of the high is in the week of 1/27/84, On the monthly ohart, you will be working with different time periods, but the prioe level stays the same.
Theee charts are square, or geometrio charts, so where the 45 degree angles down from the top and up from zero, intersect on the same date, we have fifty percent of the high prioe, in both price and time. This is the week of 1/27/84, and a prioe of 28 1/4. So, in other words, fifty percent of the price level of the high is in the week of 1/27/84, on a weekly chart. On the monthly chart, you will be working with different time periods, but the prioe level remains the same.
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