more activity as prices attempt to cross whole number barriers, such as each 100 for the S&P, or each 1,000 for the DOW.

After the 100°o level, decreased importance goes to increments of 50°o, 25>c>, 12 1/2,%. and so on. For agrain, this would mean that major resistance could be expected at the even dollar levels with the next resistance at 500 intervals, then every 25 c, and so on; after a bull move of $1, the major siport would be $1 lower, then 50.c, 250 and 75c, and so on. The use of successive halving of intervals was also extended to time. A year is a full cycle of 360(% which makes one-half of a year equal to 26 weeks, one-quarter of a year 13 weeks, one-eighth of a year 45 dajs, and one-SLxteenth of a year 22Y2 dajs. in cases of conflict, time alwajs took precedence over price. The combination of a key price level (percentage move) occurring at a periodic time interval is the basis for much of Gaims work.

Geometric Angles

The most popular of Gaims methods is his use of geometric angles for relating price and time. By using square graph paper, it was not necessarj to know the exact angle because the constraction was based on the number of boxes up versus the number of boxes to the right. A 1 x 1 angle (45) was drawn diagonally fran the bottom of the lowesl point of a price move through the intersection 1 box up and 1 box to the right. This is the primarj bullish support line. A bearish resistance line is drawn down fran left to right from the highest price using the 1 x 1 angle. The next mosl important angles in order of signiflcance are 2 x 1, 4 x 1, and 8 x 1; for lower support areas there is also 1 x 2, 1 x 4, and 1 x 8. Places where the support and resistance lines cross are of special signiflcance, indicating a major congestion area.

Figure 14-18 IS taken from Gaims private papers and shows the use of geomefric angles in an actual frading situation. Lines were first drawn where Gann expected a bottom, then redrawn. The initial upward move followed the primary 45 line; the second important support line, 1 x 2, met the primarj downward line at the point of wide congestion at the center of the chart. The highest point on this congestion phase became the pivot point for the next 45 downward angle deflning the next breakout. Traders have found the primary 1 X 1, or 45 line, an important tool for staying with the major frend. It is used to filter out small reversals in both standard charting techniques and point-and figure.

Gann combined this method with a more remaricable technique, the squaring of price and time. It was fortunate to find a chart that complemented Figure 14-18, based on the lowest recorded cadi price of soybeans, 440 per bushel. Figure 14-19 shows how Gann constracted this square, beginning with the lowest price at the center and moving one square to the right, circling counterclockwise and continuing the process. The basic geomefric lines (horizontal, vertical, and diagonal) indicate the major support and resistance price levels; the most important one being 44, the junction of all lines.

FIGURE 14-18 Ganns soybean woricsheeL

mOURE 14-19 May soybean square.

Relating the square to the price chart showing geometric lines, the first support level is seen to be exactly al 240 (upper left diagonal), the major resistance at 276 (right horizontal), the next minor support at 268 (lower right diagonal), congestion area siport at 254 and 262 (1 box off), and bad; down to support at 240. Notice that the distance between the lines on the square becomes wider as prices increase, conforming to the notion of greater volatility at higher prices, it is also expected that soybeans at $10 will have some lost motion near these key siq3porl and resistance levels.

The Hexagon Charl

Gaim generalized his squaring method to include both geometric angles and the main cyclic divisions of 360 By combining these different behavioral concepts, the strongest levels of siport and resistance are found where all three coincide. The generalized constraction for this piMpose is the Master Calculator, t)ased on aligning the chart at a point representing a multiple of the lowest historic price for that market; crisscrossing angles

will then designate siport and resistance for the specific market. Other time charts of importance are the Square of Twelve (one corner of the Master Calculator), the Hexagon Chart, and the Master Chart of 360 The Hexagon Charl can be used as an example of the combined effect.

As shown in Figure 14-20, the inner ring begins with six divisions, giving Gann the basis for the chart name. Each circle gains six additional numbers as it proceeds outward, which relates to the overall continuity of the construction. In using the hexagon, the degrees represent time and the numbers in the circle are price; a major siq3porl or resistance point exists when both time and price occur simultaneously.

For example, consider the 360 of the hexagon relating to the calendar year, or perhaps the crop year for grains. In his own work on grain, Gann equated 0 to March 20, near to the first day of spring when the sun crosses the equator going north. Then, the 45 line is on May 6, 90 on June 21 (the first day of summer), 180 on September 23 (fall), and 270 on December 21 (winter). These primarj divisions also represent the most significant places for price siport and resistance. The other lines represent secondarj levels.