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103

etomplweryclw 34 (amplete cyclai l4*complstti)tl«

tim»«o>l days

the cis(. byslcm sta cuutedasr

tw piice dncCDcnnill bcn on. or shonl after, ihe daycal-

n=1.618x-t,

.,, = 1.618 X ch,-h.-,) + n,

where ii and Hi are the days on which lows and highs occurred, and ii occurred before H,.

For simplicity, an extreme may be used only twice-once as the first poim and once as the second. Figure 14-16 shows the order in which the calculations occur. Time-goal day was calculated fixim lows i, and i* before time-goal day - occurred. When more than one time-goal day occurs at the same point, or when the highs or lows that formed the time-goal days are more significant, the likelihood of a major reversal increases.

FIGURE 14-16 Calculation of time-goal days.



Specific entry signals occur on a 5-day price reversal. A long signal is given following a time-goal day when the closing price is higher than the high of the past 5 dajs. This is sufficient to identifj a trend change and allows the stop-loss to be the recent low or a fixed point below the entry point.

Price objectives are determined using the same highs and lows. Elliotts wave theory is refined by Fischer, as shown in Figure 14-17. Once the low has been found, followed by wave 1, the price objectives for waves 3 and 5 can be calculated as a function of wave 1:

Wave 3 objective = .6 18 x (wave 1 - low) + low Wave 5 objective = 1.618 x (wave 1 - low) + low

The pullbacks to points 2 and 4 are not determined in this calculation, and the probability of the five-wave formation occurring is not confirmed unless the wave 3 objective is satisfied. Price goals are used for profit-taking rather than new entrj points. The GSC Sjstem, however, does not require that maikets move in five-wave pattems Price objectives can be calculated from long-term lows as 1.618 x initial move up. When price and time goals occur at the same point, there is greater reliance on the signal.

In general, refracements from sustained moves can be expected to approximate or exceed 38.2>o (1 -.618) of the initial move. Once a high-level objective has been reached and a reversal occurs, consistent profits may be taken using this goal. If prices fail to make

-lE::ampleE"ftinie ai IJarcLApnl 19S4)

ipnceobjectii

be f .mid in Tucker J Emmett, Eibonacci ?vcleE," Tecimical Amalysis i Ltccts &

ilJay 19B3 and

FIGURE 14-17 Price goals for standard five-wave moves.



new highs following the first retracement, objectives for the next lower levels down can he set according to the inverted Elliott wave pattems, or 1. 618 x initial downward move.

Filtermg Highs and Lows

The GSC Sjstem can be made to identifj- with more significant highs and lows by increasing the selection filter For example, a sensitive sjstem would select highs and lows in gold that are separated by a minimum swing of S 10 per ounce. More significant points may be identified by swings of S20 per ounce, it can be demonstrated that a small filter will generate highs and lows that are produced by noise rather than significant behavioral actions. The sjstem caimot be forced to produce more signals than the natural pattems allow.

The selection filter sh-uld be adjusted for m.irket volatihty At higher price levels tiie noise also incites and mil obscure tiie more imp. itant high and hW points Although Fischer niy-triefly (Uches on this, tr&lerr who ifvily this method ;Ji..uld be prep.Ted to adjust the selection filter frni time totinie

WD. GANN-TIME AND SPACE

The woiks of WD. Gann cannot be explained with any thoroughness in a few words, but some of his main ideas have been selected and presented in this section. Gann was a pure technician using charts for all his analjses. His methods varied substantially from conventional charting techniques, but his philosophy was one of a professional trader: Conserve Your capital and wait for the right time Gann traded primarily grains for many years, and in his writings he attempted to summarize his most important observations: some of them are reminiscent of other well-known maifcet lore.

Price moves are never exact. Gann m-as a believer in support and resistance lines, but expected some violation of the objectives because of lost motion his way of accounting for the momentum that carries prices higher or lower than their likely goals. Nearly a cross between Elliotts waves and Angas cycles, Gann classifies bull and bear moves into four stages, each one compared with a trending move and a subsequent reversal culminating in a major top or bottom. He observed that bull maikets last longer than bear markets. He conchided that reversal pattems must reduce in magnitude as the move develops and persists. A similar aigument is expressed in the theory, of contrarj thinking. Much of Gaiins work is related in 1940 cents and requires an economic inflator close at hand to adjust prices to todays levels.

Gaiins techniques combine mathematics and geometrj with time and space; he finds duration as important as the size of the price change. One of his principles reflects the idea of a longer consolidation period resulting in a longer price move after a breakout. One popular approach to price objectives in bar charting is exactly this idea.

Time and Price

Gann proposed certain natural divisions for price swings expressed as percents. Zero and 100°o are the mosl important of these. Based on behavioral awareness, he considered a potential resistance level at 100°o of the original point of the move or 100° of the highest or lowest (the best guide) price of that maifcet. In a reversal, 100° was a full retracement of the original move. The rationale for this theory is behavioral, as is his conchision that most traders like even numbers; for this reason orders in grains are most often placed at 5 and 100 levels. Even now, traders will find



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