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Awcohen Three Point Reversal Method of Point Amp Figure Stock Market Trading PDF
Awcohen Three Point Reversal Method of Point Amp Figure Stock Market Trading PDF
Awcohen Three Point Reversal Method of Point Amp Figure Stock Market Trading PDF
HOWTO USETHE
Pof,mt6
Sfock Market Trading
BY A. W. GOHE]I
ffi@ffiM' GHARTCRAFT,
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onraruAt rnte ) 0Fp0tXT
ilETH0D PUBL'ST]ED AV}
& FIOURE
TRADITO LARGHM||JIT,
JI.Y.
FOR SALE & EXCHANGE
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Three-Point ReversalMethod of
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Pof,nt{P
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A TECIIIIICAI.
APPR(IACH
I|l ST(ICT
ilARI(IIIRIIIIIIG
P U B T I S HBEYDC H A R T C R A
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l CT. ,T A R C H I I ( l 1} II T.Y,.I 0 5 3 8
Copydght
- 1968,1978,1982,& 19&4by Chartcraft,[nc.
nrUtisneaby Chartcraft,Inc., Larchmont,NY
Catalogue
Libraryof Congress Number:68-54093
Page
Foreword D
Introduction 6
15
The Double Top & Double Bottom Formation (# 1) 16
The Double Top & Double Bottom Formation (#2) 18
The Bullish Signal Formation 20
The Bearish Signal Formation 22
The Bullish & Bearish Symmetrical TriangLes 24
The Triple Top Formation . . 26
The Triple Bottom Formation 2B
Formations In Combination 30
Variations On The Triple Top & Triple Bottom Formations . 32
The Broadening Formation 34
The Spread Triple Top & Bottom Formations . 36
Bullish & Bearish Cataputt Formations . 3B
The Bearish & Bullish Signal Reversed F'ormations . 40
Section Three - Trend Lines 43
The Bullish Support Line 44
The Bullish Resistance Line 48
The Bearish Resistance Line 50
The Bearish Support Line 53
Section Four - Price Objectives .
55
The Horizontal Count Db
The Vertical Count
5B
The Horizontal & Vertical Count
60
Section Five - Relative Strength
61
Section Six - Industry Groups .
65
Section Seven - The Dow-Jones Industrial Average
69
Section Eight - Trading Tactics
73
Establishing The Trade
74
Profitability Tables
74
The Pu]lback
75
Profitability Tables
76
Stoploss Orders
77
Taking Profits
78
SectionEight (continued)
StocksWith A High Short Interest. 80
Volume. 80
SectionNine - ConvertibleBonds . E1
SectionTen - Over-The-Counters. 85
SectionEleven - TechnicalIndicators 89
The CumulativeDaily Advance-DeclineLine . 90
The High-Low Index 91
The On-BalanceVolumeIndex 92
The Odd-Iot BalanceIndex 93
The Odd-Lot Short Saleslndex 94
The 10-DayAdvance-DeclineRatio . 95
The 10-DayUpside-DownsideVolume Ratio 96
The 200-DayDJIA Momentum Index 97
The DJIA One-YearToChart . 98
The Index of SpeculativeConfidence 99
The Gold Mining Disparity lndex 100
The Short Interest Ratio . 101
The % of NYSE StocksAbove Their 10-WeekMoving Average ' r02
The lO-WeekMost Active StocksRatio 103
The NYSE Bullish Percentage 104
The DJIA Bullish Percentage. 105
GeneralMotors as a Bellwether Stock. 106
-4-
FORWARD
The basicprinciples of "How to Use the Three-PointReversalMethod of Point & Figure StockMarket Trad-
ing" were ftrst published in 1947under the trtle "StockMarket Timing. " When the Chartcraft Weekly Service
was started in 1948,the name of the book was changedto "The ChartcraftMethod of Point & Figure Trading."
In August 197E,we publishedthe sixth revisededitionof this bookwhich includedrevisedchaptersdealingwith
the Dow'JonesIndustrial Average, Over-The-Counter Stocks,and TechnicalIndicators.In March 1980,the
Seventheditionwaspublishedcontaininga revisedchapteron OptionTrading.
This is the eighth revisededition. It containsrevisedsectionson Price Objective,RelativeStrength,Tech-
nical Indicators,Options,and Commodities.
Althoughfuture editionsare constantlyin the planning,the basicprinciplesremainthe same.
Specialacknowledgment is made to ProfessorRobertEarl Davisof PurdueUniversity.He was kind enough
to let us read his lengthy manuscript, "Proft and hobability-Technical Analysis of the Price Fluctuations of
'
CommonStocks,' and haspermittedus to usehis figureson the profit potentialof the varioustrading formations
containedin this book. All the formationswere programmedfor an IBM 7094computerand the results were
obtainedon the basisof tradingfrom buy signalto sellsignal,and sell signalto buy signal,with trend lines taken
into account,
A. W. Cohen
July 1982
INTRODUCTION - THE TWO APPROACHES
ar companycanbeapproached
T h e p r o b l e m o f t h e p u r c h a s e o f s t o c k i n a n y p a r t i c u l"should
way is to pose the problem as: I buy the stock of
in either of two ways. One "When shall I buy the stock
theXyZ Companyi" The other is to pose the problem as:
of the XYZ ComPanY?"
"Should I?" is taking the fundamental approach
The person who asks the question "When shall I?" is
to the stock market analysis. The person who asks the question
taking the technical approach to stock market analysis'
The technical analyst concerns himself with suppiy and demand, accumulation
and distribution. Practicaliy all stocks have substantial moves at one time or another'
"blue chip" as of a "cat and dog. " No stock goes up
Fluctuation in price is as true of a
in price of its own accord. Before a stock goes up it goes through a period of accumu-
"insiders, rr it is passing from "weak hands" into "strong hands" until demand
trtio.r by
is greater than supply and the upward move is on its.way' Bef.ore a stock drops in price'
"insiders. " It is passing from
it goes through " p""ioA of distribution by the same
"slrong handi" into "weak hands. " When support is withdrawn, supply overcomes
is concerned with
demand and the panicky downward move is on. The tecbnical analyst
to determine the
the right time to Uuy and the right time to sell short. He attempts
situation. He is an
moment when either supply or demand has taken control of the "insiders" are doing'
,,outsider" making ,r"" oi various techniques to determine what the
a
When should a stock be bought? The broad answer to this question is that
stocks egeneralmarketisinanuptrend,(2)theindustry
group of which it is a member is in an uptrend, and (3) the stock itself is in an uptrend.
- the price of a market average, the price of
ffptrlnO, as used herein, refers to price
cash
the industry group index, the price of tne stock. It does not refer to earnings,
the
fJ.ow, growth, etc.; such factors may answer the question what to buv but never
question when to buY'
When should a stock be sold short ? The broad answer to this question is that
astockslrouIdu.@thegenera]marketisirradowntrend,(2)the
(3) the stock itself is
industry group of which it is a member is in a downtrend, and
in a downtrend. The trader or investor who does not like the short side of the market
should at Ieast be out of stocks in such a situation. Here again, downtrend refers only
to.price and nothing else.
The tools used by the technical analyst in nraking such determinations are
of
primarily charts - charts of a particular stock, charts of an industry group, charts
a market Average or Index. There are three types of charts: line, bar, and Point and
Figure. This book is devoted to Point and Figure charting and interpretation. It is
the oldest form of charting used in the stock market, it is indigenous to and grew out
of the stock market, and once n:astered and understood it is also the simplest and
clearest method of determining the right tinre to buy and the right tiure to sell. The
Point and Figure chart shouts where other charts merely stutter.
-6-
SECTION ONE
In Figure # 1, we have a Point and Figure chart "under the aspect of eternity. "
By this, we mean that both vertical and horizontal coordinates are based on price
changes. In the usual line or bar chart, the vertical coordinate is based on price and
the horizontaL coordinate is based on time (day, week, or monttr). This is not the case
in a Point and Figure chart. Chronology has no significance in it. The only thing it
concerns itself with is a stockrs price changes independent of the time in which these
changes take place. The chart patterns that this chart develops are independent of the
time it takes for their eoming into being, whether it is a matter of days, weeks, months,
or years. Their significance for the future remains the same.
Although we will include chronological data in the body of the Point and Figure
chart, as wiLl be seen in the ensuing pages, this wilL be done merely to establish a
frame of reference.
THE POINT AND FIGURE CHART
When the price of a stock is going up, we use Xs to indicate the price changes.
When the price of a stock is going down, we use 0s to indicate the price chatrges.
Over 20, therefore, a price change of 3 points or three dollars would be necessary
for a trend reversal. If the price of a stock has gone up to 50, it must go down to 47
before we car record the 0s in the next vertical column.
At the borderline of ,20t 3 squanes may represent only 2 ot 2'l points, but a
reversal occupying 3 squares is drryays necessary.
In the same trend, however, each point or |-point is added as the stock continues
on lts way up or down.
Over the 20 price square, we have'no fractions at all on our chart. If a stock has
gone up from 32 to 39-?/8, the highest X in our column will be in the 39 square. If a
stoct< has gone down from 57 to 43-1/B ttre lowest 0 in our column will be in the 44th
square (it never made an even 43).
Under the 20 price square) the only fractions we have are in |-point units. If a
stock has gone rpi"orn tO-i to L3-7 18, the highest X wilt be in the 13-| square; and
if it has gone down from 16 to 13-5/8, the lowest 0 will be in the 14 square (it never
made an even 1g-*).
Over 100, each square should represent 2 points or two dollars. The 3 squares
necessary for a trend reversal will therefore stand for 6 points or six dollars except,
of course, at the borderline of 100.
Ttre Polnt and Flgure chart, as ne have constnrcted lt, becauee of the 3-box
rerrergal necessary for a change ln dlrectLon, elLmlnatee all mlnor and confuelng
moves. It 18 eLople, clear and conclge. It lends ltself easlly to correct ln-
terpretatlon. It 18 sLnple to conatnrct and malntaln.
-9-
Figure # 3 is a Point and Figure chart of Union Carbide. It illustrates the units
of charting when the price of a stock rises and falls above 100.
At the borderline of 100, the 3-box reversal may sometimes equal 4 dollars
and at other tin-res 5 dollars.
The important fact to keep in mind is that above 100 we have only even units
and no odd units. Thus if a stock goes up to 115, the high on our chart would be 114;
if a stock goes down to 107, the low on our chart would be 108.
In all other respects, the chart is basically the same as that of Bucyrus-Er.ie,
in Figure # 2.
-10-
CHARTING A VERY LOW-PRICED STOCK
In discussing the charting of stocks under the price of $20.00, we have laid
down the general rule that such stocks should be charted in Il2 point units by a l-ll2
point reversal. However, there are occasions when charting very low-priced stocks in
this manner wiII not give any discernible chart patterns over long periods of time.
This is especially true of stocks under $5.00 that are not too active.
To overcome this defect, such a stock may be charted in smaller units. Each
square can be made to represent ll4 point with 3/4 point necessary for a change in di-
rection.
Once the price gets above $5.00 then we go back to the standard 1/2 point unit.
CHART CONSTRUCTION
The Point and Figure chart of Bucyrus-Erie was constructed from the daily
stock tables appearing in the Wall Street Journal. Any newspaper reporting the daily
highs and lows may be used. Because the 3-box reversal eliminates the minor and
insignificant price changes, there is no need to subscribe to any special price change
service in order to construct and maintain a chart of this type.
We are appending below the daily high and low figures of Bucyrus-Erie for
the year 1961. We have also added a column showing the chart entries to be made from
these figures. This rvill enable you to practice making a chart. We suggest that you
cover the column marked chart entries and only use it to check your own postings. The
figure after the colon represents eighths of a point; the figure in parenthesis represents
the month, i. e., (i) January, (2) Februarv, etc.
Chort Chort
Dote High Low Entries Dote !rs! Low Entries
Jon. 3 t4 l3:4 13t-14 21 19 l8:5
4 14:7 13:7 (t)l4i 23 l8:6 l 8 :I
5 l5:4 14:7 l5-l5l 24 l8:4 l7:7
6 l5:5 14:7 27 l8:6 l 8 :I
9 l5:6 l5:5 28 lP:4 l 8 :I
l0 |5 : 7 l 5 rI
Mor. I l8z2 t8
ll l5:4 l5:2
2 l8:4 l8
t2 |5:2 l5
J l8:3 l7:6
l3 |5:2 t5
6 19:7 1725 (3)le j
l6 15:2 l4:7
7 2023 l9:2 20
t7 l5 14:6 8 20 19:4
l8 l5:4 l 5 :I 9 20:3 20
l9 l 6 ;I 15'4 16 l0 20:7 2022
20 |5t7 l5:5 l3 22 2l::2 2l-22
23 l6:2 15:7
l4 21:7 20.5
24 16:2 l6
l5 19:7
20:7
25 l 6 :I 15:7 t6 21:3 20:6
26 |5 : 7 15:4 17 2l:2 20:2
27 l5:5 l5:4
20 21:2 203
30 |5:7 l5:4
21 2l 20:4
3l l5:6 l5:2 22 2l 20:3
Feb. I l5.2 l5 23 2l:3 2024
2 l5:6 l5:3 24 21:6 2 lt l
3 |5:4 15:2 27 22:2 2l:7
6 l5:3 l 5 :I 28 22:1 2l:6
7 l5:2 l4:7 n 2l:7 2l:3
I l5:3 14:7 30 2l:7 2l:3
Y l5:3 l5 April 3 2 lz 7 2123
l0 |5:2 l 5 :I
4 2l:3 2l
l3 l5:3 l 5 :I
5 2l:1 20r4
t4 l5t7 l 5 :I
6 20:I 19:6
l5 l6:2 l5:6 7 19:7 l8:4 2t-20-(4)t9+-19-
l6 17:4 l6:3 (2)16+-t7-t7l
l8*
t7 l8:3 l7:5 18
t0 2023 l9:5 19-19+-20
20 l9 r8 l8+-le ll 20:5 20:l
-L2-
Chort Chort
Dote High !9w Entries Dote Esb Low Entries
-13-
Chort Chort
Dote High Low Entries Dote High Low Entries
Sept. I 171.3 17:2 Nov. I l6:6 l6:2
5 17:3 17:l 2 1722 1624
6 17:l l6z7 (e)17 3 17:3 t7
7 17:1 l6:6 6 172 l6:7
8 172 l6z6 I t8 1 7 2 2 | 7 - 1 7 + - (ll) l 8
ll l6:6 l6-2 t6+ I l8:3 l8
12 l6:5 l 6 :I l0 l9:5 l8.2 l8*- l9-l9+
l3 172 l6.4 l3 20zl t9$ 20
l4 17:6 lTzl t4 19:7 - 192
18:5
l5 1 7z 5 17:3 t5 19:7
l8 17:4 l6:7 l6 l8:4 r8 re+-re-r8+-r8
l9 1 7t l l6:5 l7 l8:6 l8:2
20 l6:5 l6:4 20 l8:6 l8:3
21 l7:3 l6t6 2l l8:4 t82
22 17:2 t7 22 l8:2 l7:6
25 17:3 l6z6 24 t8 17$
26 17:3 l6:5 27 17:7 l7:4 l7l
27 lTzl 16:7 28 17:7 17:4
28 l7:l l7:1 n 17,:6 17:3
n 17:l l6:7 30 17:5 17z3
Oct. 2 l7:1 l6:6 Dec. I 17z5 17:3
3 16:6 l6:5 4 l8:4 l7:5
4 l6t7 l6:5 5 l8:4 l7:5
5 lTtl l6:6 6 17:6 l7:4
6 l7:l t7 7 t7l.3 17:2
9 1 7 17 I l 8 :I 17:2
l0 t7 t7 ll l8:4 l8:2
II lTzl l6:7 t2 l8:6 18:2
12 lTtl l6z7 t3 l8:4 l8:2
f3 l7z2 17:l l4 l8:4 l8:3
16 17:6 171.3 l5 l8:4 l8
17 17:6 17:2 l8 l 8 :I l7:5
l8 t7A lTzl l9 17:5 l7z5
t9 172 t7 20 t8 17z5
20 l7z2 l6:5 2l t8 17:6
23 16z7 l6:5 22 17:7 17z6
24 lTzl l6:5 26 l8 17z6
25 l7 l6:4 27 17t7 17:5
26 16:6 16:4 28 17:7 t7A
27 16:5 l6:4 n 17.5 17:2
30 16:7 l6:3
3l 16;4 l6:3
This method of charting is based on the elimination of the minor and insignifi-
cant intra-day moves.
If your last chart entry is an X, then look at the daily high. If the stock has
gone up enter the additional X or Xs and forget about the lows. If the stock has not
gone up then look at the low for a 3-box reversal.
If your last chart entry is an 0, then look at the daily J.ow. If the stock has
gone Iower enter the additional 0s and forget about the highs. If the stock has not gone
Iower then look at the daily high for a 3-box reversal.
-14-
THE DOIJ-BLE TOP AND DOUBLE BOTTOM FORNIATION (#1)
Since all other formations are derived from these two basic formations they
may contain the Double Top or the Double Bottom formation as part of their chart pat-
terns. The trader will then have a choice to act on the original breakouts or on those
occurring later in the more complex formations.
-16-
Mills ( GlS)
Gener al
GeniscoTech. (GES)
The formations illustrated above are variations on the Double Top and Double
Bottom formations #1 in Figure #6.
In example A, the breakout at 35 takes place after two bottoms have been made
at the same level instead of merely one bottom. The first bottom at 31 was retested
and held. Then came the rally for the breakout on the Double Top formation. This
t1'pe of Double Top formation is more common than a straight upmove from a single
bottom.
In example B, the breakout at 41 occurs after two tops have been made at the
same leve1 instead of merelv one top. The first top at 45 was retested and held.
Then came the decline for the breakout on the Double Bottom formation. This type
of Double Bottom formation is more common than a straight downmove from a single
top.
In these #2 formations four vertical columns are required for their completion.
These chart patterns mav also appear as integrai parts of more complex formations
and the trader or investor has the choice of acting on these breakouts or on the
breakouts that occur in the more complex formations.
-18-
FOR SALE & EXCHANGE
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Contacts
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Skype: andreybbrv
ICQ: 70966433
Consolidated
Mining& Smetling Continental
Air Lines (cAL)
j?i#:rrr
I I | | I I l.t | | lct I I | | | | I I | | | I I I I I
Duffy-Mott
Horn & Hardart (HOR)
THE BULLISH SIGNAL FORMATIO\
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0 ) , xIl r---l'-t--
The Butlish Signal formation is one of two classic chart patterns used in timing
a stock purchase. The significant feature of this chart pattern is a higher bottom
followed by a higher top. As long as a stock continues to make higher bottoms and
higher tops it is bullish. The first time it makes a higher top after making a higher bot-
tom is the signal that the stock may be bought. It is teiling us that Demand has overcome
Supply and that the stock, which hitherto may have been bearish and in a downtrend, is
now ready to make its upward move. Accumulation bt'those in the know has been com-
pleted.
For the three most common patterns of the Bullish Signal formation, see Fig-
ure # B. In example A, we have a bottom at 31 and then a higher bottom at 33; it also
has one top at 36 and then a higher top at 37. When the higher top is made at 37, the
stock, in technical parlance, has had an upside breakout and has given a buy signal.
In aII of the three examples, the point at which the buy signal is given is indicated by
the letter B.
Four vertical columns are required for the Bullish Signal formation.
-20-
Borden (BN) AmericanZinc, Lead& Smelting(ZA)
SunbeamCorporation(SMB)
VolumeMerchandise(VLM)
THE BEARISH SIGNAL FORMATION
The Bearish Signal formation is one of two classic chart patterns used in timing
a stock sale. The significant feature of this chart is a lower top and a lower bottom.
As long as a stock continues to make lower tops and lowerbottomsitisbearish. The
first time it makes a lower bottom after making a lower top is the signal that the stock
may be sold. It is teiiing us that Supply has overcome Demand and that the stock,
which hitherto may have been bullish and in an uptrend, is now ready to make a down-
ward move. Distribution by those in the know has been completed.
For the three most common patterns of the Bearish Signal formation see Fig-
ure # 9. In example A, we have a top at 45 and then a lower top at 43; it also has one
bottom at 40 and then a lower bottom at 39. When the lower bottom is made at 39, the
stock, in technical parlance, has had a downside breakout and has given a sell signal..
In all three examples, the point at which the sell signal is given is indicated by the
Ietter S.
In exampie B, we have a top at 45 and then a lower top at 44; we aLso have a
bottom at 41 and then a lower bottom at 40. The lower bottom at 40 is ttre signal that
the stock may be sold. In this case, it took place at a higher level than in the first
example, although both chart patterns started'from the same high at 45.
In example C, we again have a top at 45 and then a lower top at 42; we also see
a first bottom at 39 and then a lower bottom at 38. The lower bottom at 38 is the signal
that the stock may be sold. In this example, the sell signal took place at a lower level
than in the two previous ones, although all three chart patterns started with a high at
45.
Four vertical columns are required for the Bearish Signal formation.
-22-
International
Business (lBM)
Machines Rectifier(lRF)
International
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II
The Bullish and Bearish Symmetrical Triangles are basically mere variations
on the BuIIish and Bearish Signal formations. However, since triangles have always
occupied an important role in technical analysis, we have decided to deal with these
two formations separately.
The Bullish Triangle formation is profitable 71. 4Toof. the time for an average
gain of 30.9%. The average time for the gain is 5.4 months. The Bearish Triangle for-
mation is profitable 87. 5Toof. the time for an average gain of 33.3T0:the average time for
the gain is 2. 5 months.
-24-
ic Corp. (GP)
Georgia-Pacif
lnternationalHarvester(HR)
Reynolds(R.J.)Tobacco(RJR) (RXM)
Richardson-Merrell
THE TRIPLE TOP FORMATION
The Triple Top formation is the second of the two classic chart patterns used in
timing a stock purchase. Unlike the Bullish Signal formation, it is only the action of
the stock at previous tops that is important, not at bottoms. No higher bottoms are
necessary in this formation. A11 that is necessary is the penetration of two previous
tops. The penetration of two previous tops by a third top compensates for the fact that
the chart formation has no higher bottom. Because of the higher bottom in the Bullish
Signal formation, the penetration of only one previous top was necessary. This for-
mation must have a minimum of five vertical columns.
In example B, we have a base of accumulation between 31 and 35. The first top
is at 35 and the second top at 34. The buy signal was given at 36 when these two tops
had been exceeded.
In none of the above examples have we higher bottoms. All of these formations
have level bottoms at 31. We compensate for the lack of a higher bottom by waiting for
the penetration of two previous tops.
Examples B and C contain Double Top formations within them, but many traders
wait for the Triple Top breakout.
-26-
HillerAviation(HlL) HowardJohnson(HJ)
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l'igure # 12
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The Triple Bottom formation is the second classic chart pattern used in timing
a stock sale. Unlike the Bearish Signal formation, it is only the action of the stock
at previous bottoms that is important, not at tops. No lower tops are necessary in
this formation. AIl that is necessary is the penetration of two previous bottoms. The
penetration of two previous bottoms by a third bottom compensates for the fact that
chart formation has no lower tops. Because of the lower top in the Bearish Signal for-
mation, the penetration of only one previous bottom was necessary. This formation
must have a minimum of five vertical columns.
In example A, we see a top distribution between 45 and 42. There are two level
tops at 45. The seII signal was given at 4L when these two bottoms had been penetrated.
At this point Supply has overcome Demand and an extension of the downmove is to be
expected.
In example B, we have a top of distribution between 45 and 41. The first bottom
is at 41 and the second bottom at 42. The setl signal was given at 40 when these two
botcoms had been exceeded.
In none of the above examples have we lower tops. AII of these formations
have
level tops at 45. We compensate for the lack of a lower top by waiting
for the penetra-
tion of two previous bottoms.
Examples B and C contain Double Bottom formations within them, but many
tt'addrs weit for the Triple Bottom breakout.
-28-
PittstonComPanY(PCO)
ManvilleCorP.(MAN)
Example A isan illustrationof both the Bullish Signal formation and the Triple
Top formation combined into one. It contains the essential elements of both formations.
It has both higher bottoms and higher tops plus the penetration of three tops. The buy
signal which takes place at 38 (indicated by the letter B) is both a buy signal on a BuII_
ish Signal formation and a Triple Top formation. This chart patternoccurs less fre-
quently than either of the two separately, but when it does occur it is usually
a very
strong buy signal. This formation is profitabte ?9.510 of.the time for an average gain
of 360/o. The average time for such gain is g months.
Example B is an illustration of both the Bearish Signal formation and the Triple
Bottom formation combined into one. It contains the essential elements of both for-
mations. It has both lower tops and lower bottoms plus the penetration of three bottoms.
The sell signal which takes place at 38 (indicated by the letter S) is both the sell signal
on a Bearish Signal formation and a Triple Bottom formation. This chart pattern occurs
Iess frequently than either of the two separately, but when it does occur it is usually
a very strong se1l signal. It is profitable 83. 3o/oof the time for an average gain of
22.9o/0. The average time for such gain is 3.4 months.
- 3 0-
Allied Products(ADP) AluminumCompanyof America (AA)
Example A shows the upside penetration of not merely three tops but actually
four tops. Sometimes you may have a penetration of.five or more tops. From a timing
point of view, this has no more significance than the penetration of merely three tops.
The stock cannot be bought until the penetration occurs and it occurs at the same point
no matter how many previous tops are penetrated. The difference in the formation is
important when trying to estimate the extent of the subsequent move. We will deal with
rrcounts" to estimate the probable extent
this more fully when we discuss the various
of the move. But brief mention should be made of this here. Since you have more
vertical columns in this variation of the Triple Top formation, any horizontal count
across the formation will necessarily show a greater potential upmove.
Example B shows the penetration of not merely three bottoms, but actually
four bottoms. Everything we said above about example A appties to example B, but
in reverse, of course.
"tail" down. Note the
Example C shows a Triple Top formation with a long
downmove in the fourth vertical column before the final upmove in the fiftl eolumn to
give the buy signal on the penetration of the Tripte Top. This formation also occuis
frequently in chart patterns. It is an unusually strong formation. The reason for this
is that what at first appears to be a heavy overhanging supply of stock (between 35 and 38)
was not actually so. There actually was no supply of stock to interrupt the upward move
"tail" down was not due to an overhead supply but,
towards the breakout. The long
perhaps, to some news factor that was interpreted incorrectly (or sometimes even to
some misleading news), or to some dramatic international or national event also in-
correctly interpreted for the moment. The move up after such a happening is usually
very dynamic and profitable.
"tail" up. Everything
Example D shows a Triple Bottom formation, with a long
that was said about example C applies to this example as well but in reverse, of course.
-32-
THE BROADENING FORMATION
re#15
The chart patterns in Figure # 15 are actually a Triple Top formation in exam-
ple A and a Triple Bottom formation in example B. In example A, we have the pene-
tration of three tops with the buy signal at 40. In example B, we have the penetration
of three bottoms with a sell signal at 36. But they have a certain characteristic about
them which singles them out for special attention.
Example B is the same broadening type of formation with the breakout on the
downside. It goes from a bottom at 38 to a top at 4L, then a lower bottom at 37, and a
higher top at 42, then the final breakdown on the third lower bottom at 36. This bearish
formation occurs so infrequently that it is not worthwhiiillooking for. In a bear market,
the ordinary Triple Bottom formation serves the purpose very weII (here, too, the best
"tail" up).
of the Triple Bottom formations, is the one with the long
-34-
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Inc. (ABT) Inc. (HON)
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THE SPREAD TRIPLE TOP AND BOTTOM FORMA
re# 16
Example B illustrates the spread Triple Bottom formation. Thi's is a very broad
from six up. The sell
formation and can have any number of vertical columns in it,
These bottoms are not
signal takes place on the penetration of three level bottoms'
example above, the three
consecutive but have intervening moves between them. In the
bottoms are at 39 and the sell signal is at 38 (indicated by the letter S)'
may have
In both of these formations buy and sell signals on other formations
patterns. The time involved in building a spread
occurredduringthebuilding of the chart
than in the chart formations
Triple Top or Bottom formation is usually much longer
years' (See charts
heretofore discussed. It may take from several months to several
first top took place in April
on facing page. ) In the chart of columbia Broadcasting the
1961 and the buy signalinDecember 1962. In the chart of J' C' Penney, the time elapsed
the market, a lesser pe-
was from February-1g62 to March 1964. On the sell side of
riod of time is usuaIIY involved.
Both of the above formations, contain Double Top and Double Bottom patterns
within them. However, many traders prefer to wait for the final breakout'
-36 -
ColumbiaBroadcasting
System(CBS) IncoLtd. (N)
J. C. Penney(JCp)
TelecomCorp. [IEL)
- 3 7-
BULLISH AND BEARISH CATAPULT FORMATIONS
igure # 17
To qualify as a Bullish or Bearish Catapult formation the move from the original
breakout, whether up or down, cannot exceed seven points. Neither can the pullback
from the original breakout decline below a previous bottom in the Bullish Citapult for-
mation or exceed a previous top in the Bearish Catapult formation. If either of these
two happen, then there is no possibility of this type of formation.
These formations occur about 50% of the time after an original Trip1e Top or
Triple Bottom formation. It is often worthwhile to wait for such a chart pattern to save
time that may elapse in waiting out a pullback. It is sometimes better to sacrifice a
number of points for the sake of better timing and less risk.
- 3 8-
General Dynamics (GD) Gulf & Western Industries (GFW)
Both of these formations usually prove most profitable. They do not occur too
often, but they should be taken advantage of when they do happen.
-40-
KendallCompany(KEN)
GCACorp. (GCA)
:l-lgJ- | | |
:- ouy
-4r-
In the previous pages, we have dealt with the most common trading formations
that occur both in bull and bear markets. We have by no means exhausted all their pos-
sible combinations and permutations. Recognizing trading formations is just a matter
of study and practice. The more you study charts the more formations you will discover.
Some may prove to be more profitable than others. You will probably find some new
chart patterns on your own. If you chart enough stocks, you may be able to limit your
own trading to one or two formations that you think best.
We must warn you, however, that chart patterns are not always in themselves
"faLse" breakouts. A
guarantees of successful trades. You have probably heard of
breakout from a base of accumulation does not automatically guarantee a profit on the
long side of the market; nor does a breakout from a top of distribution automatically
guarantee a profit on the short side of the market. There are otler technical factors
that have to be taken into consideration.
In the next section of this book we deal with one of these factors, namely, trend
Iines. The importance of trend lines cannot be overemphasized. It is one of the most
"false" breakouts.
important tools that can be used in recognizing and avoiding
-42-
SECTION THREE
TREND LINES
The chart patterns discussed in Section Two are but the first step in deciding
whether a stock should be bought or sold. The next step is to determine whether or not
thesignalstheyare giving are in agreement with the basic trend in the stock. And this
is where trend lines assume their importance.
The following pages are devoted to a discussion of the importance of these trend
Iines and their proper functions will be iLlustrated in actual stock charts.
-43-
THE BULLISH SUPPORT LINE
The chart of American Airlines shows a low of 15i in October 1962. Its first
buy signal was given in November at 19 on a Double Top formation and its second in
January 1963 at 19{ on a BuIIish Signal formation. ABuliishSupportLinemay now be
drawn. It is indicated by the broken line on the chart. It is drawn from the square be-
Iow the October low and is extended as far to the right as the chart paper will allow .
This line does not connect points. It is a line drawn from the lowest point made
after the completion of a bear market or a significant downmove. It intersects succes-
ive ascending corners of the squares on the chart. It is a predictive line because it can
be drawn immediately when an uptrend begins and one does not have to wait to connect
bottoms. This line rarely has to be changed. A line connecting points constantly has
to be revised as its points change. There is no rationale either behind a trend line
connecting points or one drawn in this manner. Both are different methods of draw-
ing a straight line. In a 3-box reversal point and figure chart, this type of line gives
better results than a line connecting points.
As you can see in the above chart, theBullishSupportLine was not changed once.
-{s long as the chart pattern remains above this line, the stock is long term bullish.
Once this line is finally penetrated on the downside all bullish positions inthestockshould
be closed out. A long term trader can stay with a stock as long as the BullishSupport
Lineisnot violated. Any sell signals given above this line are apt to prove false, espec-
cially if given close to the line. It is best not to take any short positions as long as the
cnart pattern remains above this line. This rule can onlybe violated by a "scalper"
'*'ho goes for a point or two.
-44-
THE BULLISH SUPPORT LINE
In the above chart of Bausch & Lomb we have an October L962low at 22 followed
by higher tops and higher bottoms with a buy signal at 29 in February 1963. We are now
ready to draw the BuIIish support Line. Again it is drawn connecting each successive
corner of the square above from the lowest point'
The Bullish Support Line in this illustration shows how, on several occasions, the
price came down to the line and then bounced right off it. This happened in November
1963 and in June 7964. (In January 1963, it actually gave a false sell signal on a Double
Bottom formation).
This chart points out two important factors: 1) donrt take a sell signal close to
the BullishsupportLine and, 2) tne touching of theBultishSupportLine can, if one so de-
sires, be used as an additional buy point. If one uses such action as an indication of an
additional buy point, then one should place a stoploss order immediately beneath the
t rend line.
In this case, too, the long investor can keep his long position as long as the price
action of the stock remains above the BuIIish Support Line.
The chart of Bausch & Lomb shows three main buy signals j the first one at 29 in
February 1963 on a Bullish Signal formation, the next one at 35 in December 1963 on a
Triple Top formation, and another one at 40 in July 1964 on a Triple Top formation.
They were all successful formations and money would have been made on any of them,
but it is always advisable to get in on the first formation. This assures you tl-regreatest
possible profit and protects you against a sudden change in trend.
You donrt need any special tool to draw the trend line. You just draw the line
through each higher corner of a square as you move to the rlght.
-45-
THE BULLISH SUPPORT LINE
The chart of U. S. Gypsum illustrates both the ostensible and the true penetration
of a major support line.
The Bullish Support Line was drawn from the low at 66 made in October 1962.
This was the final bear market for this stock.
In January 1964, this trend line was ostensibly penetrated by one point when the
price declined to 84. The trend line passed through the B5 square. The reason we
classify this as only an ostensible but not a true penetration of the trend line is based on
the chart pattern at that juncture. At that particular time, based on the chart formation
alone, the stock did not turn bearish. The buy signal given at 91 on a Triple Top for-
mation was still in effect. The decline to 84 did not in any way change the pattern from
bullish to bearish - a bearish signal could only have been given by a decline to 83, the
penetration of a previous bottom. Since the chart formation was still bullish, the pene-
tration of the BullishSupportLineby only one point did not change the trend of the stock.
A penetration of this kind is not valid and should be disregarded.
The above chart of Jones & Laughlin illustrates a possible exception to the gener-
aI rule never to make a short sale above a Builish Support Line.
Here, too, the main Bullish Support Line was drawn to connect each higher cor-
ner as you move to the right from the October low of 39.
On the way up, four sell signals were given above the bullish trend line. The
first one was in June 1963 at 53, seven points above the trend line. The second one was
in November 1963 at 59, nine points above the trend line. The third one was in August
1964 at 79, nineteen points above the trend line. And the fourth one was in November
1964 at 78, 16 points above the trend line.
If we were following our general rule never to sell short above the BullishSup-
portLine, then all of these sell signals should have been disregarded.
The first two signals should have been disregarded evenifwewanted to make an
exception to this rule because they were too close to the builish trend line. They did not
warrant a short sale because the profit p66Ti6l-was not commensurable with the risk
involved. However, the sell signals given later might have warranted the risk because
of the greater profit potential But even here, only the fourth sell signal turned out to
be profitable.
The rule to be gleaned from the above is, therefore, that at times where a signal
is given at a considerable distance from the main BullishSupportLine, a sell short sig-
nal may sometimes be profitable. But if undertaken, the risk involved should always be
borne in mind and allowed for.
- 4 7-
THE BULLISH RESiSTANCE LINE
The chart of Atlantic Refining illustrates two bullish lines - a Bullish Support
Line with which we are already familiar and a Bullish Resistance Line, which we are
introducing for the first time.
The lower line on the chart is, of course, the Bullish Support Line. The upper
line is the Bullish Resistance Line. This trend line is drawn in the same manner as
the Bullish Support Line. It is a bullish line because its trend is upward. It is a re-
sistance line, because there is a tendency on the part of the price pattern to stop or
meet resistance at this line.
When and how is it drawn? It is drawn after a break out from a bullish chart pat-
tern. In the chart illustrated above, there was a breakout on a Triple Top formatiqn at
50 in September 1962. When this happened, the Bullish Resistance Line was drawn.
Where was it drawn from? It was drawn from the extreme left of the formation where it
runs into a sort of waII of 0s. It is always drawn from the top of the highest X next to
t'wall. "
the
If you will study the chart, you will see that eight upmoves stopped near or atthis
Bullish Resistance Line. This does not mean that the long term trader need step out of
his position every time this line is approached. He should hold his position as long as
the Bullish Support Line remains intact. The short term trader, however, may at times
use this line for in-and-out trading or scalping - selling when the Bullish Resistance Line
is approached and buying when the price falls back near the Bullish Support Line.
-48-
THE BULLISH RESISTANCE LINE
The chart of Sinclair Oil illustrates the fact that theBullishResistanceLine isnot
as immune to penetration as is the Bullish Support Line.
The Bullish Support Line,which was drawn from the October 1962 low, is still
intact.
The firstBullishResistanceLinewas penetrated within a couple of months after
it nas drawn. In November 1962, stock gave a buy signal at 35 on a Triple Top forma-
tion. The first BultishResistance Linewas drawn by going to the extreme left of the for-
mation to the wall of 0s. It crossed through the 39 square; this was penetrated on the
upside in January.
A second buy signal took place in March l-963 at 41 on a Spread Triple Top for-
mation. This new signal, plus the fact that the first BullishResistance Linewas pene-
t r a t e d , n e c e s s i t a t e d t h ed r a w i n g o f a s e c o n d B u ] l i s h R e s i s t a n c e L i n e . T h i s w a s a g a i n d o n e
by going to the extreme left of the formation to a waII of 0s. This second BuIIishResist-
ance Line is stitl in effect and has not been penetrated.
A penetration of a firstBullishResistanceLinemay be used as a new buy signal.
This is an optional procedure; we prefer relying on the standard chart patterns described
in Seetion Two.
There is one other important feature in this chart that should be studied, and that
is the double top at 45 in February and May of 1961. A double top inPoint andFigure
work is not necessarily interpreted bearishly. It may be bearish for the immediate
future but it also acts as a magnet for the next upward move in the stock. Thus, when
Sinclair OiI gave its first buy signal at 35 in November L962, an intermediate term price
objective of 45 could have been set for the stock. This was reached by April 1963.
-49-
THE BEARISH RESISTANCE LINE
The chart of Hunt Foods illustrates the Bearish Resistance Line. It should be
compared with Figure # 19, the chart of American Airlines, which illustrates the Bullish
Support Line. One is the exact opposite of the other.
Hunt Foods gave a sell signal in January 1962 at 65 on a Double Bottom formation
and a second signal at 5g on a Bearish Signal formation.
A trend line - in this case a Bearish Resistance Line - was drawn from the high
of.72. It is a line intersecting the corner of each successive lower square as you move
to the right.
It is important to point out that this line was not penetrated during the entire rise
of the market from June 1962 to May 1965. At no time should this stock have been bought.
The fewbuysignalsthat appeared below this line should have been ignored. This illus-
trates the value of the trend line - whether up or down. In the case of Hunt Foods, you
were alerted to the fact that buy formations below the Bearish Resistance Line would
probably prove false and should not be acted upon. This was a stock to avoid. If you
wanted to buy a stock, then you should have bought one that had penetrated its Bearish
Resistance Line.
-50-
THE BEARISH RESISTANCE LINE
The Bearish Resistance Line was drawn from the high of 82 made in July 1959.
This was the final bull market high made by this stock.
There were two ostensible penetrations of this 1ine, the first at 56 in August 1961,
and the second at 52 in January 1962. In neither of these cases was the previous high
exceeded when this penetration took place. These penetrations were, therefore, not val-
id and should have been disregarded. The chart patterns remained bearish during both
these penetrations.
It should be pointed out that in the buIl market of 1961, the price just about reach-
ed the Bearish Resistance Line. Any buy position taken in January 1961 at 51 on a Dou-
ble Top formation was limited by the Bearish Resistance Line. A trader or investor
rvho realized this might have looked for another stock in which to take a buy position.
-51-
THE BEARISH RESISTANCE LINE
The above chart of Dow Chemical should be compared to the chart of Jones &
Laughlin (Figure f 22). It illustrates the same principJ.e, but in reverse.
The Bearish Resistance Line is a trend line drawn from the high of 85 in
in August 1961. This stock gave a sell signal in October 196I at 77 on a Bearish Signal
formation. It made its final low at 40 in June 1962.
In August L962, the chart pattern shows a buy signal at 48 on a Bullish Signal
formation. Should this buy signal have been taken? Was it valid? The general rule is
that it should have been disregarded because it took place below the Bearish Resistance
Line. The long term investor should adhere to this rule under all circumstances. He
can find buy signals in other stocks that take place after the penetration of the Bearish
Resistance Line. An exception can, however, be made in favor of the short term trader.
Because the Bearish Resistance Line is so far above the point where the buy signat is
given, he might step in andbuythestock - always bearing in mind that the downward 1ine
wiII limit the upward move. The stock may move to the line, may actually .reach it, or
faII far short of it. In this case, the price of Dow Chemical came up to the line and the
trade would have been very profitable. This type of trade can only be recommended to
the short term trader who fully realizes the basic risk involved.
-52-
THE BEARISH SUPPORT LINE
In the above chart of Gibraltar Financial, we have two bearish or downward trend
Iines. The top line is the Bearish Resistance Line which has already been discussed.
The bottom line is the Bearish Support Line.
If you will refer to Figure fi 23, you will see that the Bearish Support Line is the
converse of the Bullish Resistance Line. The Bullish Resistance Line gave us an indi-
cation as to where the upward move might encounter temporary resistance. The Bearish
Support Line gave us an indication as to where the downward move might meet with
temporary support.
The Bearish Support Line is drawn in the same manner as the Bearish Resis-
tance Line. It is drawn, in the above illustration, after a sell signal is given on a
Bearish Signal formation. It is drawn from the extreme left of the formation where
it encounters a "wall" of Xs.
Since a downmove is usually sharper and of shorter duration than an upmove, the
move does not usually stop exactly at the line but may penetrate it by a point or more.
This happened four times in the chart of Gibraltar Financial. However, this support line
sti1l serves as a guide that can be used to determine where buying support might come
in to temporarily halt the downmove. The short-term trader can use this guide to cover
his short position and to reinstate it, once more, when the price movesclosertothe Bear-
ish Resistance Line. The long term trader may disregard it and stay with his position as
Iong as the price pattern remains below the upper Bearish Resistance Line.
-53-
FOR SALE & EXCHANGE
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ICQ: 70966433
THE BEARISH SUPPORT LINE
In the above chart of Fibreboard Paper we have three bearish trend lines. The
top one is the main Bearish Resistance Line. The two lower ones are Bearish Support
Lines. See and compare Figure # 24 which deals with Bullish Resistance Lines.
The next sel1 signal took place in January 1960 at 45 on a Spread TripJ.e Bottom
formation. Here, again, we go to the extreme left of the formation and draw a 45 degree
line down. This was again penetrated by the chart pattern which formed from July tJ
November 1960 and some support did come in for a ten point rally from 25 to 85. The
final Iow of Fibreboard Paper was made in June 1962 right at the second Bearish Support
Line.
In a bear market, usually more than one Bearish Support Line has to be drawn.
Sometimes two and even three may have to be drawn. This is due to the fact that a down
move is sharper and takes less time than an upmove. More Bearish Support Lines are
penetrated on the way down than BuIIish Resistance Lines are penetrated on
the way up.
-54-
SECTION FOUR
PRICE OBJECTIVES
Section Two and Three were devoted to the problem of timing - when a stock
should be bought and when a stock should be sold short. The next logical question is,
having bought the stock at the right time, how much of an upside move can be expected ?
And, conversely, having sold a stock short at the right time, how much of a downside
move can be expected? This section will attempt to answer these questions. It witl deal
with:
1. Trend Lines
2. The Horizontal Count
3. The Vertical Count
-55-
THE HORIZONTAL COUNT
,\
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-56-
THE HORIZONTAL COUNT
-57 -
THE VERTICAL COUNT
The above chart of B. V. D. Company illustrates the vertical count in a bull market,
just as the two previous charts illustrated the horizontal count
in a bull market.
The Bullish Support Line remained intaet since the low made in June Lg62,
The
basic trend of the stock was bu1lish. The Bullish Resistance Line
also held up fairly wel1
giving us a good idea as to where the price of the stock might go,
- and where ii mighl
meet with resistance as the ehart pattern moved to the right.
The vertical count is taken a-fter the double bottom at B|. If there
are two bottoms
at the same level, the count is taken after the second bottom. The first upmove
after the
final bottom was 13 squares. Since these squares were below 20
and, therefore, in *-
point units, we multiply 13 by 1l (since the 3 squares needed for
a reversa.L amount to
l]-points). This gives t" a iroa.tct of 19|. we trren aaa trre tn+L trr. r"* .r gr.
;"j g"t
a Price objective of 28. This price objective was made in June 1g6s.
There is no time limit within whieh a Price Objective has to be reached.
In the
case of B. V. D. the vertical count was taken from the bottom of the 1g62
bear market
and the Price Objective was reached three years later.
-58-
THE VERTICAL COUNT
The above chart of Carrier Corporation also illustrates a vertical count in a bull
market.
The Bullish Support Line was drawn from the September 1960 low at 1B]. This
line even remained intact during the 1962 bear market. The Bullish Resistance Line also
gave one a good idea of how high the price of the stock would go as the chart pattern de-
veloped.
The first upward move after the September 1960 low consisted of 16 squares.
However, these squares were both above and below the 20 price so that they had different
values. This naturally would affect the vertica-l count and the method to be used in taking
it.
From 20 and below, we have 3 squares in ]-point units. These we multiply by 1]
and get aproduct of a|. Above 20, we have 13 squares in 1-point units. These we mul-
tiply by 3 and get a product of 39. 39 and 4] gives us a total of a3|. 43! added to the low
point of 18] gives us a Price Objective of. 62. It should be borne in mind that this count
was made in June 1961 after the first upmove of 16 squares had been completed in May.
In August 1965, the price of Carrier Corporation was 61. Here we have a Price Objec-
tive that was practically reached after a period of about 4f years.
The length of time it takes a Price Objective to be reached depends on how high it
is and what kind of a market is taking place. It will be reached in a matter of weeks or
months or years. Short term counts may be taken during the progress of the move. For
example, in May L964, the chart shows a buy signal at 38 on a Triple Top formation. A
horizontal count on this formation would be 5 x 3 added to 34, giving a Price Objective
o'f"dl-mis was reached by May 196b.
-59-
THE HORIZONTALAND VERTICALCOUNT
The chart of ASE, reproducedabove,illustratesboth horizontal and vertical countsin a bear market.
A top of distribution formed after the stockreachedits all-time high at 91. After the sell signal at 79, we
were ableto determineboth horizontaland vertical pdce objectives.
Vertical count: The first downmoveafter the 91 high consistsof 9 squares.Multiplying this by 2r gives us a
product of 18which we subtractftom the top, giving us a count of 73.
Horizontal count: The top of distribution is 12 squareswide. Again we multiply this by 2| and subtract it
from the top at 91, which gives us a count of67.
As the top broadenedin the 75-81area, it becamepossible to computeadditional counts. A vertical count
from the E1 high worked out to 45 while the 11 horizontal squaresin this formation multiplied by 2 and sub-
tracted from El was 59.
r This was a changefrom previous editions in which we muliplied by 3. We still multiply upside price
objectivesby 3 as well as the DJIA.
-60-
SECTION FIVE
RETATIVE STRENGTH
-61-
The relative strength chart of Great Atlantic & Pacific Tea Company, reproduced
above, illustrates how such a chart may, at times,cautionyouagainstbuyingastock which
may look good technically from every other angle.
In October 1964, Great A. & P. gave a buy signal at 42 on a Spread Triple Top
formation. At that point, the price pattern had also penetrated the Bearish Resistance
Line. A vertical count yielded a Price Objective of 50, and on a horizontal count one
of 59. On the basis of the trend chart alone, buying the stock at 42 would have been tech-
nically correct.
However, an examination of the relative strength chart for the same period would
have shown that the stock was acting weaker than the Dow-Jones Industrial Average. It
had not penetrated a previous top and, therefore, had not given any buy signal on the rel-
ative strength chart. This was additional technical information that could have been used
in deciding whether or not to buy the stock. Since it was an adverse technical factor, one
could have concluded that there were better stocks in which to invest onets funds at that
particular time.
The relative strength chart is derived by dividing the closing price of the stock by
the closing price of the Dow-Jones Industrial Average. Doing this once a week is suf-
ficient. The resulting ratio figure is then plotted on a regular Point and Figure chart,
The decimal point may be ignored.
-62-
In Figure # 36, we have.the trend and relative strength chart of General Motors.
The relative strength chart plots the ratio figure obtained by dividing the closing price
of General Motors by the closing price of the Dow-Jones Industrial Average. This is
done once a week.
A relative strength chart is most useful at market turning points, either from
bearish to bullish or bullish to bearish.
An examination of the trend chart of General Motors shows that during April,
May and June of 1962, the price of the stock was going down. On the other hand, on the
relative strength chart we have an upmove during May and June of L962. In other words,
although the price of GM was actually dropping during that period, it was, nevertheless,
acting stronger than the Dow-Jones Industrial Average.
This contrary action of the trend and relative strength charts was putting us on
notice to watch General Motors. It was pointing to the possibility that once the bear mar-
ket was oveF, General Motors would be a very good stock to buy. The trend chart did
finally give its first buy signal at 51 in July 1962 on a Double Top formation and another
buy signal in November at 56 on a Triple Top formation. During all this time the rel-
ative strength chart had never turned bearish. In March 1963 it began almost a vertical
upward move showing extraordinary strength when compared to the Dow-Jones Industrial
-{verage.
-6 3-
Figure # 37 illustrates another use that may be made of relative strength charts.
Here we have two relative strength charts, one of Sears, Roebuck and the other of
Montgomery Ward.
A comparison of the charts of the two companies can answer the question as to
which stock should be bought and sold at any specified time.
Montgomery Ward started out as the better of the two. It started acting stronger
than the Dow-Jones Industrial Average in September L962, while Sears, Roebuck only
started acting stronger than the Dow-Jones Industrial Average in May 1963. Thus, im-
mediately after the bear market of 1962, Montgomery Ward was a preferable buy when
compared to Sears, Roebuck.
However, Montgomery Ward stopped acting stronger than the Dow-Jones Indus-
trial Average in June 1963 and was definitely out of the running by October. Sears, Roe-
buck on the other hand continued to show more strength. At this time, then, it would
have been wise to switch out of Montgomery Wardinto Sears,Roebuck. As a matter of
fact, Sears, Roebuck continued to act better until May 1965 and did not turn bearish
until September. Montgomery Ward, on the other hand, has continued its weaker action
and is still in a downtrend.
Trend lines and trading formations should be used in interpreting relative strength
charts. But it should always be borne in mind that a column of X s means that the stock
is acting stronger than the DJIA and a column of 0 s means that it is acting weaker.
-64-
SECTION SIX
INDUSTRYGROUPS
Thus far we have used the followingcriteria in determiningwhen to buy or sell a stock: 1) Breakoutsfrom
trading formations,2) TrendLines,3)PriceObjectives,and 4) RelativeStrength.
We now subjectour discussion,thus arrived,to Industry Groups.The stockwe buy shouldbe in an Industry
Groupanalysis.The stockwe buy shouldbe in an IndustryGroupthat is bullishand that is actingbetter than the rest
of the market.
-6 5-
In Figure # 38, we have two Industry Group charts, one of Drugs and the other of
Vending Machines. The purpose of this illustration is to point out the importance of se-
lecting a stock in the right Industry Group.
It wiII be sufficient, for our purpose, to examine both charts since the end of the
bear market in 1962.
The Drug stocks made their bottom in September 1962 and then gave a buy signal
in November. This was the go ahead signal, which meant that individual stocks in this
group could now be bought. The next step to be taken is to examine the individual
stock charts in the group in accordance with all the principles laid down previously -
trading formations, trend lines, price objective, relative strength - and to pick the best
tec'hnically situated stoc'ks for possible purchase.
The Vending Machines stocks made their bottom in October 1962. However, the
group chart dicl not give any buy signal immediately thereafter. There was no point then
in taking any position in any of the stocks comprising this group. A trader or investor
is always cronfrontedby a choice. And if he had to choose between the Drug stocks and
the Vending Machine stor:ks, an analysis of the group charts made his choicc obvious.
The Vending Machine Industry Group did not turn bullish until October 1964. This
was the first time that a trader or investor was confronted with the problem of whether
or not he should buy Vending Machines stoclis.
- 6 6-
In Figure # 39, we illustrate how relative strength charts can be used in choosing
between different industry groups (assuming that the trend charts in the same groups
have given buy signals).
The relative strength chart of the Air Transport group shows a buy signal in
February 1963. The relative strength chart of the Copper group does not show a buy sig-
nal until September 1964.
If in February 1963, we had to choose between these two groups for the investment
of funds, there would have been no question that the right group would have been the Air-
lines. This group started to act better than the market at that time and continued to do
so until March 1965, a period of over two years. Remaining invested in this group during
this entire period brought extraordinary profits.
The relative strength chart of the Copper group shows that it started to act worse
thanthe market as a whole in March 1960 and continued to do so untit September 1964.
It also indicates that it would not have been worthwhile to take positions in stocks in this
group during the entire bull market of 1961. The relative strength chart was saying that
there were much better groups for the commitment of funds even though some Copper
stocks may have been rising. It was not until September 1964 that the Copper group sig-
nalled that it was starting to act better than the rest of the market. Not until this signal
took place should investments have been made in Copper stocks.
The relative strength figure for an Industry Group is obtained by dividing Standard
& Poorrs Index figure for the group by Standard & Poor's 425 Industrials.
-67 -
MEAT PACKING
In Figure f 40, we have both a trend and a relative strength chart of the Meat
Packing Industry Group. The figures for the relative strength chart are obtained by
dividing the group index figure by Standard & Poor's 425 Industrials.
In the Meat Packing group, highsareusually made in February and lows in Octo-
ber. In the trend chart we see a high in March 1956, a low in November 1957, a high in
February 1960, a low in September 196Q a high in February L962, a low in October 1963,
and a high in March 1965. Even some of the minor moves make highs and lows accord-
ing to this seasonal pattern - a high in February 1959, February 1961, April 1963, and
Iows in October 1961, and October 1964.
The trend chart is the most important for determining the seasonal pattern. The
relative strength chart may be used as a check. It shows highs in February 1962, Feb-
ruary 1963, January 1964, and March 1965. The lows appear in Novembet 1962, Octo-
ber 1963, and October 1964.
-68-
SECTION SEVEN
The most well known of the Stock Market averages is the Dow-Jones Industrial Average. We keep thir
chart three ways:
The 2 X 6 point chart is used for very short term trends, the 5 X 15 point chart is used for intermediate term
trends, and the l0 X 30 point chart is used for long term trends. All 3 charts are posted through the daily hourly
figures of.LL, 12, l, 2, 3, and close.
The Dow-Jones Transportation Average is kept on a 2X6 point basis. It is useful as an indicator of the
trend of secondarystocks as opposedto the "blue chips" on the DJIA. This chart is also kept by using the daily
hourly figures of.Ll, 12, L, 2, 3, and close.
For Dow Theory, use the DJTA and the 10X30 point DJIA. When both give buy signals, you have a Dow
Theory bull market; when both give sell signals, you have a Dow Theory bear market.
Futures trading has begun recently in three other broader market averages: the Value Line Index, the S&P
500, and the NYSE Composite.
Our short-term chart of the DJIA is a ZXG point reversal chart. The readings are based on the hourly fig-
ures at ll,12, 1,2,3, and close. Each square represents 2 points, and 3 squares or 6 points are necessary for a
change in direction.
This chart of the DJIA should be used as you would a chart of an individual stock. It is buliEh when its
chart patCern shows a penetration of a previous top; it is bearish when its chart pattern shows the penetration of
a previous bottom. Bullish Support Lines and Bearish Resistance Lines are also of primary importance. These
lines show where an upmove may run into resistance and a downmove may encounter support. Vertical counts
and horizontal counts to deterrnine price objective may also be used.
This chart is an excellent tool for short-term traders and is especially useful for 50 point swinge the martet.
-69-
DOW.JONES INDI]STRIAL AWRAGE (5 X 15)
-the
Out basic chart of the DJIA is a 5 x 15 point reversal chart. The readings are based on
hourly figures at ll, 12,| ,2, 3 andclose.Eachlquate represents5 points, and 3 15
squares_or points
"." n"""ir"ry for a change in direction. The 3b'clock was added October l, 1974,when trading
hourswereextendedto 4 pm.
This chart ofthe DJIA shouldbe used as you would a chart of an individual stock. It is bullish
when its chart pattern shows a penetrationof a previous top.; it is bearish when its chart pattern
showsthe peneirationof a previousbottom. Bullish SupportLines and Bearish ResistanceLines are
also of primary importance.Theselines showwhere an upmovem-ayrun into resistanceand a down-
-ou" tit"y eniounter support. The types of chart formations, whether triple tops, triple_bottoms'
bullish triangles, bearisiitriangles, etc., are also of significance. Vertical counts and horizontal
countsto determineprice objectivemay alsobe used.
Although the DJIA may sometimeslag behind other technical indicators at market tops,.it
usuallyleadiallindicatorsaimarketbottoms. In the few caseswhere it does not lead another tech'
nical indicator , it is coincident with it . It is not a laggard at market bottoms . This may be ttue becau-se
blue chip stocis are usually the last to fall at the end of a bull market and the first to turn up at the
end ofa bearmarket.
-70-
DOW-JONESINDUSTRIAL AWRAGE (10 X 30)
This chart of the DJIA showsthe longer term trends. It avoids many of the minor buy and sell
signals which show up on the 5 x 15 point chart. The buy and sell signals on this chart are, there-
fore, more significant and important to the longer term trader and investot. A comparisonof both
charts will showhow signalsmay differ or confirm eachother.
Besidessignals,BearishResistanceLines and Bullish Support Lines may also differ on the two
charts. The 10 x 30 chart will showlonger term trend lines and major support and resistancelines.
Signalsand trend lines that coincideon both charts are ofpractical significance.
-7t-
DO W.JONES TRANSPORTATION AW RAGE
Eachsquareon this chart represents2 full points and 3 squares,or 6 points, ate necessaryfor a
changein direction.The readingsare basedon the hourly figures at ll, 12, 1,2,3 and,close.The
3 o'clockprice was addedon Octoberl,1974, when trading was extendedto 4 pm.
This chart of the DJTAshould be usedin the sameway as the chart of an individual stockor the
chart of the Dow-JonesIndustrial Average.It is bullish when its chart pattern showsthe penettation
of a previoustop and bearish when it showsthe penetration of a previous bottom. Bullish Support
Lines and BearishResistanceLines are important fot longet term trends. When both the DJIA and
DJTA are in bullish ftends, the market as a whole is bullish; when both are in bearish trends, a bear
market is in progress. A divergence in trend between the DJIA and DJTA may signal a crming
changein trend.
-72-
SECTION EIGHT
TRADING TACTICS
- the overall
The foregoing sections of the book were devoted to trading strategy
picture of when to buy a stock and when to sell a stock'
This section will deal briefly with trading tactics, such as:
-73-
D u r i n g a bull market, with the proper use of chart patterns, trend lines, price
o b j e c t i v e , e t c . the following average results might be achieved:
The conclusion to be drawn from this comparison is that there is less risk in
selling short in a bear market than in buying long in a bull market. The average gain in
a bear market is 4.7T0 less than in a bull market, but this is more than compensated by
the fact that the average time for the gain in a bear market is 3. 3 months shorter than
for a bull market. A trader, therefore, who does not sell short in a bear market is
acting contrary to his best interests. In a lesser period of time, at a lesser risk, if he
- t+-
sells short in a bear market, he will actually make more monev than when he buys long
in a bull market. His bull market profit is at the rate of 4.09% per month while his
bear market profit is at the rate of 6,3670 per month. A trader cannot afford to lose
such a profitable opportunity. He must learn to adjust his thinking and actions to both
bull and bear markets.
Although statistically the profit probabilities are on the side of the trader and
investor who follows the market strategy laid down in the previous pages' Iike any other
method, it can in no way lay claim to certainty. What we have thus far outlined may
be the Truth but, this in itself doesnotguaranteeCerta.inty or a profit. We still have
the twofold probtem of making the statistics and probabilities more certain when we es-
tablish a trade ( although 100% certainty will never be reached) and how to handle our
trades when they are not successful. It must always be borne in mind that 171oof the
bullish trades end in losses and that about LSolo of. the bearish trades are also unsuc -
cessful.
On the first problem of the degree of certainty we can perhaps lay down the fol-
lowing rules:
1. Never buy long unless the price is above both a BuIIish Support Line and a
Bearish Resistance Line. Make sure that a vertical or a horizontal count allows for a
profit of at least SOTo(average profit being 29.510\. Rely on vertical more than on the
horizontal count, where possible. If the Price Objective obtained by a count is more
than the 30%, then it is still better. Select your trade with the highest Price Objective
in mind. Make sure that the channel created by the Bullish Support Line and the Bullish
Resistance Line also allows for a move to at least 30%.
2. Never sell short unless the price is below both a Bearish Resistance Line and
a BuIIish Support Line. Make sure that a vertical or a horizontal count allows for a
profit of at least 25To(average profit being 24,8101. On a downmove, trend lines may be
even more important than vertical and horizontal counts. Make sure that the channel
created by the Bearish Resistance Line and the BuIIish Support Line allows for a move
of at least 25%.
3. Another tactic that can be used to increase the profit percentage is to buy long
or sell short, not on the original breakout, but to establish the trade on a pullback.- Let
us illustrate this in the chart below.
-75-
l
buy signal took place. Since the average percent gain in the preceding tables was based
on buying at the point of the signal, buying on a pullback will increase the percentage
of gain. A pullback takes pLace at least 500/oof. the time in all trading formations and if
one has enough patience and keeps enough charts trading opportunities of this kind will
be plentiful.
In example B, we have the Spread Triple Bottom formation with a sell short sig-
nal at 38. After the signal, the price declined only to 3? and then pulled back to 41.
Here again, the pullback enables one to sell the stock short at a better price. In the case
of a short sa1e, the pullback should always be looked for. A stock cannot be sold short
when it continues to fall uninterruptedty - it must be sold short at an up tick of at least
1/8 of a point. The putlback assures you of establishing your short sale.
4. What about losses ? The trading forrnations described above, with all the
ramifications of the proper conditions under which a trade should be established, still
do not guarantee a profit every time a trade is made. The trader and investor should
also consider the probability of losses and how they should be handled. The loss proba-
bilities are as follows:
Taking an average, these bullish formations are unprofitable 1b. 2!o of the time,
for an average loss of g/o; the average time for this loss is 3 months.
-76-
Bull Market Formations Bear Market Formations
Two rules can be deduced from the above statistics: 1) Never let your loss go
beyond 10%, and 2) give your trade a little over three months to start working in your
favor - if it doesnrt do it by that time, close it out. These are general rules for cutting
Iosses short and switching to trades that might prove more profitabJ.e. The use of stop-
loss orders will be discussed below.
5. Another way to increase average profits and keep losses as low as possible
is to take positions only in the most profitable trading formations. Taking into consider-
ation the percentage of time a formation is profitable and unprofitable, its average gain
and loss, and the average time for such gain and loss, the best trading formation is the
TRIPLE TOP formation in a buIl market and the TRIPLE BOTTOM formation in a bear
market.
6. What about stoploss orders ? Stoploss orders are criticized on the grounds
that they often lead to abandonment of positions which ultimately turn out to be very
profitable or to "whipsaws" - the getting in and out of positions at a loss or lesser profit
until the right positions is established. This may be true but one should consider stop-
loss orders as the insurance one pays against being completely wrong. In reviewing
our trading formations, a buy signal, of some sort, is always given when the chart
pattern shows the penetration of a previous high, and a sell signal when the chart pattern
shows the penetration of a previous 1ow. If you are long of a stock, the logical point
for a stoploss order would be one square below the previous bottom; if you are short
of a stock, the logical point for a stoploss order would be one square above a previous
top. This will cut your losses short - and all the statistics referred to above are based
on just such stoploss orders, which is in effect, trading from signal to signal.
There may, however, be occasions when a stoploss order does not have to be
used as mechanically as outlined above. This is especially true for the long term trader
and investor. If you are long of a stock and its price pattern continues to fluctuate
above the Bullish Support Line, you may disregard any sell signal that takes place above
this trend line. It is only when this Bullish Support Line is penetrated that a stoploss
- 7 7-
order should be placed or the trade closed out. It is also important that the industry
group of which the stock is a member and the market as a whole be bullish. The con-
verse is true when you are short of a stock. No stoploss order need be kept as long as
the price pattern fluctuates beLow the Bearish Resistance Line. It is onLy when this
trend line is penetrated that a stoploss order should be used or the trade closed out.
Also, make sure that the industry group of which the stock is a member and the market
as a whole is a-lsobearish. When not using a stoploss order, the exercise of careful
judgment is required and emotions kept under control. If you feel you cannot do this,
then use a stoploss order.
7. When should profits be taken? We have two guides on this point: 1) the
Price Objective, and 2) the average profit based on probabilities outlined in this sec-
tion. When establishing a trade, make sure that your Price Objective ( on a vertical or
horizontal count ) is above the 29. Sfo profit probability in a bull market, and above the
24.81o profit probability in a bear market. Once your profit is above the average, stay
with your trade to see whether the higher Price Objective will be reached. Uere you
might use stoploss orders arbitrarily to clinch at Least the average profit. When the
price reaches the Price Objective ( which is above the average profit you might close
)
out your positions and be satisfied or continue to hold with arbitrary close stoploss
orders,
HOWARD JOHNSON (HJ)
- 7 8-
CHART ILLUSTRATION OF THE ABOVE PRINCIPLES
we wifl use
In Figure # 44, bn page ?B) we have a chart of Howard Johnson-
principles outlined in this section'
this chart to illustrate some of the
first buy signal in
Howard Johnson made a low of 31 in June 1962 and gave its
We would not have recommended a purchase at
July at 38 on a Double Top formation.
that point because it was still below a Bearish Resistance Line.
the Bearish
The first time Howard Johnson gave a buy signal after penetrating
1963. This buy signar
Resistance Line was at b0 on a Triple iop formation in August
Line and the Bearish Resistance Line' The
took place above both the Bullish support
or one could have exercised patience and
stock could have been bought on this breakout
percentage. After going to 55' the price
waited for a pullback to increase his profit
just this in November 1963'
pulled back to 48 giving us the opportunity to do
how
Before establishing our buy position, however, we would have to determine
the June 1962 low
high the stock might go. A vertical count on the first up-column after
place
g"rr" rr" a Price 5f;u-.tin" of ?3 ( 14 x 3 added to 31 ). With the breakout taking
than the aver-
at 55, this gave a possible profit of 18 points or 32.7010.This was higher
formation. This met another qualification
age percentage gain of 29.|Vo on a bullish
.r6""""".y for establishing the trade. If we bought on the pullback to 48 we could even
expect a profit of. 37.50/0.
Line we
Since the price pattern continued to fluctuate above the Bullish Support
patiently for our Price Objec-
did not need any stopfoss order and could proceed to wait
in February 1964
tive to be reached. we did not have to accept the sell signal given
which was just above the Bullish Support Line.
While waiting for our Price Objective of 73 to be reached, we got another buy
signal at 61 in September 1964 on a Triple Top formation. This would have given us
more confidence ifr"t tftu pric6 of ?3 would be reached. It was reached two months later
in November.
Having reached our original Price Objective we could have taken our profit and
have been quite satisfied with it. Or we could have elected to remain with the stock and
follow it upwith stoploss orders. This would stop us out of our position on the next sell
points that
signal. This would have occured at ?? in March 1965. The few additional
holding on
would have been gained did not actually warrant the additional time involved in
sat-
to our position. Taking profit at our Price Objective of 73 would have proven more
isfactory and we would have looked for another trading opportunity for the employment
of our funds - using the same principles over again in the new situation.
The chart also shows three Butlish Resistance Lines creating possible channels
within which the price might move. We could expect the first Resistance Line to be
penetrated, and even the iecond might have been broken on the upside. But waiting for
the third Resistance Line to be penetrated would be too optimistic, although it may happen
in a few cases.
There is one other important fact that should be pointed out on this chart. At
times more than one vertical count can be taken to determine a Price Objective. The
- 7 9-
E--T-
first vertical count was taken from the June 1962 low which was the lowest point reached
after the sell signal at 54 in January 1962 on a Double Bottom formation. A new ver-
tical count may be taken after another sell signal is given and the final low made. Such
a sell signal was given in February 7964 at 47 on a Bearish Signa1 formation. The low
was made the same month at 46. A verticaL count, therefore, taken on the first upmove
( or next column of Xs ): 14 x 3 added to the low of 46 gives another price Objective
of
88. In January 1965 the price reached B?. It ultimately reached BB in Augusi.
One more rule that might be of use - be content with a profit one point below
your Price Objective. In many cases, the Price Objective is missed by just one point.
B. Stocks with a high short interest. Once a month, both the WaII Street Journal
andBarron|spub1ishacomprehensiveIistofstoekswiththenumberoffi
have been sold short during the previous month. A similar list of the American Stock
Exchange may be obtained free of charge directly from the American Stock Exchange. A
short sale is accomplished by borrowing a stock from an owner (your broker does this
tbr you) and selling it. The short seller hopes to make a profit by buying the stock 1ater
at a lower price and returning the stock to the lender.
There is a general rule that a stock with a rising short interest is buLish and a
stock with a falling short interest is bearish. The reasoning behind this is that the
greater the short interest the greater the number of people that will be compelled
to buy
the stock at some future date.
We would not recommend using the rule as a technical tool for trading in stocks.
There have been too many instances when a stock has had a rising short interest for
months and the stock, nevertheless, continued to decline. Brunswick Corporation (BC),
during 1961 and 1962 is a good example of this.
There is one use, however, that can be made of the short interest in stocks.
Make a list of those stocks that have a short interest of. Ilo or more of their
outstanding
shares. There are usually about two dozen of such stocks. Never sell these stocks
short. Use these stocks for buy positions with our Bearish Signal Reversed formation
(see page 40). Such stocks can provide the opportunity
for substantial and fast profits.
-80-
t
SECTION NINE
CONVERTIBLE BONDS
A convertible bond can be converted into the related common stock at a spec-
ified share-to-share ratio, either indefinitely or up to a specified date.
A convertible bond, bought at the right price and at the right time, combines
most of the safety of a bond, the yield of an ordinary bond, and the appreciation potential
of a common stock. A convertible bond has an approximate price floor but no price
ceiling.
Because of the relative safety of certain convertible bonds, banks wiLl often lend
up to B5lo of the market price of a convertibte. With only a L51omargin required, the
gain potential on a cash investment may thus be larger than on the related common stock.
The interest paid on the loan is fully tax deductible.
This section will be devoted to the problem of ehoosing a convertible bond for
trading and investment purposes by Point and Figure charts. AJ.so,does the chart of a
convertible anticipate or follow the chart of the related common and how can thev be used
in conjunction with each other.?
Figure # 45 is a chart of the convertible bond of Richfield Oil (5 3/Bs '83). It is
constructed exactly as the chart of a stock. Since its price range is above 100, each
square represents two points with three squares or six points necessary for a change in
direction. The chart is based on the daily highs and lows of the convertible appearing in
the Wall Street Journal.
@istanceLinewaspenetratedinApri11963at136.Thefirstbuy
signal, afterthispenetration, tookplacein August at 132 on a Double Top formation and
one immediately thereafter at 138 on a Spread Triple Top formation. These signals
were both valid since they took place after the penetration of the Bearish Resistance Line
and above the Bullish Support Line. The Bullish Support Line was drawn from the
October 1962 low of 108.
A verticai count on the first up-column after the October 1g62 low yields a price
Objective of. I92. There are 14 Xs in that column each representing 2 points; since the
reversal consists of 6 points we multiply the 14 by 6 and get a product of 84. If
we add
this 84 to the low of 108 we get a total of 192. This is the Price Objective.
Afterthebuysignals indicated were given, we could have waited for a pullback.
During September, October and November the price actually pulled back to I24,
a much
better point to buy than at the original breakouts.
None of the sell signals had to be acted upon since they all took place above the
Bullish Support Line. The Price Objective of 192 was reached in January 1g65.
The
Bullish support Line was finally penetrated in April 1965.
BOEING COMPANY
The chart of the convertible bond is constructed as we wouJd the chart of a com-
mon stock. The Bearish Resistance Line and the Bullish Support Line are the con-
ventional trend lines described previously.
In most cases there is very little difference between the chart of the common
stock and the chart of the convertible. The overall similarity can be seen in the charts
of Boeing. Both have thus far held above the Bullish Support Line.
In the case of Boeing, one could have bought the convertible bond just on the ac-
tion of the common stock. As a matter of fact, acting only on the chart of the common
would have resulted even in greater profits because the trade would have been estab-
lished much earlier. The common stock penetrated its Bearish Resistance Line in
December 1963, while the convertible bond did not penetrate its Bearish Resistance Line
until May 1964. Actually, however, the dynamic upmove both in the common and in the
convertible did not start untit May 1964, and acting on the chart of the convertible would
have been much better from a timing point of view. Capital could have been employed
elsewhere between December 1963 and May 1964.
The difference in these two charts is of minor importance although some differ-
ence in timing is evident. The same holds true for most charts and a person could buy
the convertibte bond when getting the proper signal on the common stock. However,
there are occasions when there is a significant difference between the two charts. Such
a difference is illustrated in the following charts of American Distilling.
AMERICAN DISTILLING
For every one issue of stock traded through recognizedStock Exchangesthere are about nine
issuestraded in the Over-the-CounterMarket. Besidestrading in industrial and utility stocks, it is
also the main market for insuranceand bank stocks.
Can Over-the-Counterstocksbe charted in Point and Figure? The answer is yes. And they are
even simpler to chart than stockslisted on recognizedexchanges.
Bid and askedpricesfor Over-the-Counterstocksmay be found daily in The Wall Street Journal
and The New York Times. To chart these stocks, we use only the bid price. The following 3 pages
illustrate such charts. Since these charts were produced by computer, the months October,
Novemberand Decemberare indicatedby the letters A, B and C, instead of the numerals 10, 11 and
12. Thesechartsare reproducedfrom our quarterly O-T-CChart Book.
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o 3
SECTION ELEVEN
TECHMCAI INDICATORS
"technical"
Besides analyzing stock chart patterns, technical analysis has also developed
indicators-tools designedto aid in the determinationof generalmarkettrends. A completecount of
such indicatorswould probably reachto 200or more.
We are presenting here those that we believe to be the most valuable and the most popular.
They are:
All these indicatots, and mote, ate covered" every two weeks in
"The
Chartcraft TechnicalIndicator Review.
CUMULATIVEADVANCE/DECLINE
LINE
This lndex is a non-Price measure of the trend of the narket. It ls based upon the nwber of NysE
lssues advancing and decliolng and not upon the prlce of these lssues. Every day the dif?erence between the
lssues advanclng and lssues decllnlng is calculated. If nore issues advanced than decllned, the dlfference
is added to the Precedlng dayrs total; tf Eore laaues decllned than advanced, the dlfference is subtracted
fron the previous dayrs total. The advance-decllne line nay be started wlth any arbLtrary nmber. Each square
on our chart rePresents 500 and 3 squres, or 1500, are necessary for a change in dlrection.
The dlrection taken by the advance-decllne llne is always conpared to that of the Dow-Jones rndus-
trial Average' When both are advanclng' the Mrket is bulllsh.When both are declinlng, the narket ls bearlsh.
A dlvergence ln directlon between the two usually lndicates a comlng change ln trend.
It should also be borne ln mind that the dally advance-decLlne line has a bearlsh blas. It mde
tts hlgh In March l'956 and thls hlgh has never been exceeded. since then, at least up to Decaber 1974, every
bull mrket hlgh and bear mrket low has been lower than the prevlous one.
HIGH.LOW INDEX
C O N S T R U C TOI O
FN I F T H ED A I L YN E | ,HJ I G H SA N DD A I L YN E WL O W S '
I N D E X : D I V I D ET H ED A I L YN E | ^HJI G H SB Y T H ES U I 'O
T H ER E S U L T I NPGE R C E N T AFG
PLACE i GEU R E GV E R A GAEN DP O S TT O C H A R T .E A C HS Q U A ROENT H EC H A R T
O NA I O . D A YM O V I NA
OSR6 %A R EN E C E S S AFROYRA C H A N GI N
R E P R E S E N2T%S, A N D3 S Q U A R E E DIRECTION'
OE
T H EE X T R E MPEE R C E N T A G SH I S C H A RA
NT E0 %( O C C A S I O N AA
T R EA B O V 9 LLBY
O V8 I (OCCASIONALLY
TO % )A N DB E L O II'O
BELO2
W0 % ) .
EW N M OA
I N T E R M E D I ADTO VN T H I S P E R C E N T AI S
SB E A RM A R K E TUSS U A L LEYN DW H E N
ED G EB E L O W LEVEL' INTER-
THE'IO%
M E D I A TU AS
EP M O V E N DB U L LM A R K E TUSS U A L LEYN Dl , l H E N E H E9 0 %L E V E L .
G EA E O V T
T H I S P E R C E N T AI S
G EB E L O IT' IH E ' I O %
T H EP E R C E N T AI S
T H EB E S TT I M ET O G OL O N GI S W H E N U P ' T H I S I S A B U L LA L E R T
L E V E LA N DT U R N S
AD
T O S I T I O NSSH O U LBDE C O V E R E
S I G N A L . S H O RP N DL O N GP O S I T I O NTSA K E N . A R I S E I N T H EP E R C E N T AAG
BE E PREVIOUS
O VA
E H E5 0 %L E V E LI S A B U L LC O N F I R MS
T O PO RA B O V T EIDG N A L .
G EA B O V T
T H EB E S TT I M ET O S E L LS H O R ITS I I H E NT H I S P E R C E N T AI S D O W N 'T H I S I S A B E A R
EH E9 0 %L E V E LA N DT U R N S
DU TA N DS H O RP
A L E R TS I G N A L . L O N GP O S I T I O NSSH O U LBDE C L O S EO A. D R O PI N T H EP E R C E N T A G E
T O S I T I O NESS T A B L I S H E D
S B E A RC O N F I R MM
T H E5 0 %L E V E LS I G N A L A
B E L O IA^ IP R E V I O UBSO T T OOMRB E L O W EDARKET.
, / D E XI S O N E0 F T H EB E T T E M
T H EH I G H - L O I[ N INDICATORS'
R A R K ETTR E N D
-91-
ON.BALANCE VOLUME INDEX
CHARTCONSTRUCTION:
t,lHENTHEDOW-JONES INDUSTRIALAVERAGE CLOSES HIGHER,ADDTHETOTALNYSEVOLUI4E FORTHATDAYTO
THEFREVT0UST-AFS-CIJM-4ULATIVE
ToTALi I^IHEN
THEAVERAGE cLoSis LowEn,-iuaiRAir rHE rorAl NysE voLUMEFoRTHATDAy FR0t4THE
-
PREVIoUS
DAY'SCUMULATIVE-ToTAL.,
EACH SQUARE0N THECHART REPRESENTS 20,000,000 SHARES,AND3 SQTARES OR60,000,000
SHARES
ARENECESSARY
FORA CHANGE IN DIRECTION.
T H EO N - B A L A N C E HART S H O U LB DE U S E DM A I N L YA S C O N F I R H A T I O R
N N O N - C O N F I R M A TOI O
FTNH EA C T I O NO F T H ED O W - J O N E I NSD U S T R
A V E R A G E .I F T H ED J I A P E N I T R A T EASP R E V I O UTSO PW I T H O UTTH EO N - B A L A N C VEO I - U NO
EO T I ET H ES A M E ,T H E NT H EU P I , I O VI S
E SUSPECT.
ANDvlcE vERsA'IF THEDJIAPENETRATESA PREvIous
B0TT0I4
wrrHouT ini oN-eAinNcEvoluueootno'rHE-snNe,THEDowNt4ovE
ri sus-
l59I:--F9l-A BULLMARKET'
B0THTHEDJIAANDTHEON-BALANCE V0LUME sHoULDGIvEBULLIsH STGNALS;Fonn eennMARKET,BoTHTHE
AVERAGE ANDTHEON-BALANCEVOLUI'4E
SHOULDGIVEBEARISH gi
SIGNALS.R sIGIIAI. oI'II-yONEoR THEofxEn Ts NOTENOUGH
fo cHnnei
THEEXISTINGTREND. THIS IS ACTUALLY
A MODIFICATION
OFTHEDOt.lTHEORYBY SUBSTITUTING ON-BALANCEVOLUMEFORORADDINGIT
TOTHETRANSPORTATIONAVERAGE.
VOLUHI
ACTION
SOMETIMES
OFTHEDOW-JONES lEqgqgqsPRICE
ACTIONi
AT THESE
TII'IES
THEON-BALANCE
VOLUME
CHART
wILLANTIcIPATE
THEDIRECTIoN
INDUSTRIAL
AVERAGE.
ODD-LbTBALANCEINDEX
T H I S I N D E XI S C O N S T R U CBTY
ED I V I D I N GT H ED A I L YO D D - L OSTH O RS
TA L E S
B Y T H ED A I L YO D D . L OTTO T A LS A L E S . T H ER E S U L T I N G
M T I O O RP E R C E N T AI S
G ET H E NP L A C EO
D NA 5 - D A YM O V I NA
GV E R A G ET. H I S M O V I NA
GV E R A GFEI G U R E
I S P L O T T EODNT H EC H A R T .T H E
O F T H EC H A R ITS . 2 % A N D3 B O X E O
SCALE S R . 6 %A R E ' N E C E S S A
FROY
RA C H A N GI E
N D I R E C T I O NT. H ES C A L E
O F T H EC H A RH
T A SA L S OB E E N
R E V E R SS
EOD T H A TU N U S U A LHLE
YA V Y
O D D - L OSTH O RS
TE L L I N G
A P P E A RASS A B O T T OAMN DV E R YL I G H TO D D - L OSTH O RS
TE L L I N G
A P P E A RASS
A TOP.
T H I S I N D ] C A T OHRA SU N D E R G OANMEA J O C
R H A N GI E
N R E C E NYTE A R S
D U ET O T H EE X I S T E N C
OEF L I S T E DP U T SA N DT H EG R A D U A
ELX -
P A N S I OO
NF T H EN U M B EORF P U T SO F F E R EFDO RT R A D I N G .
I T M A YB E S E E NT H A TT H EP A R A M E T EHRASV ER A P I D L C
Y HANGE
SDI N C ET H E1 9 6 0 ' S . T H E1 9 6 6 B E A RM A R K EETN D E W
D I T HO D D - L O T
S H O RSTA L E SR E A C H I N9G
9 0 O F T O T A LO D D - L OSTA L E S . I N T H EN E X TD E C A DPEE A KL E V E L S
DROPPE
GDR A D U A LTLO
Y3 . 8 % I N I 9 7 5 .
V E R YL I G H TO D D - L OSTH O RS
TE L L I N G
W A SU S U A L LIY
N D I C A T EW
DH E T
NH EP E R C E N T Al .G
l AESA T . 4 . T H I S O C C U R RIENDD E C E I , 4 B
I 9E6R2 ,
M R C H1 9 6 5 , J A N U A R1Y9 6 6 A N DD E C E M B1E9R6 9 . T H EL A S TT H R E E
WERG
E OOD
IND1CATION
OSF M A R K ETTO P S . S I N C ET H A TT I M E , H O W E V E R ,
i E H A V EH A DA W H O LSEE R I E S
O F S U C HI N D I C A T I O N SO
. N L YD E C E M EIE9R
72 INAUGURAT
AEM
DA J O R
D O I , I N M O VI N
E . J U L YI 9 7 6 , P E R C E N T A G E
E T A C H E. 2
D% . A D O W N M OI N
VET H ED J ] A F R O M ' I O 2TOO 7 5 0 F O L L O W E D .
A S A G E N E R ARLU L E ,I T C A NB E S T A T ET
DH A TO D D - L O T T ESRESL LS H O RV
TE R YL I T T L EA T M A R K ETTO P SA N DS E L LS H O RQ
TUITE
. : T V I L Y A T I 4 A R K EBTO T T O M
- SA T B O T H] N T E R M E D I AATNEDM A J O T
RU R N I NP
GO T N T S .O V E R
T H EL A S TF E t ,Yl E A R ST, H ] S I N D I C A T OHRA S
. , 5 I S O MO
EFI T S R E L I A B I L I T Y .
-94-
1o-DAYADVANCE/PECLINERATIO
The above point and flgure chart is constructed as follovs: Each day divlde the dal1y Advances by the total of
dally Advances and Decllnes. Place the resultlng ratio on a 10-day hoving average and plot the resulting flgure on the
chert. Each square equals LZ and 3 squares ot 37. are neceasary for a change ln dlrection,
Chart interpretation conslsts of the followlng eldents: (L) dlrectlon of the Doveent, (2) penetratlon of a
prevlous top or botton, (3) whether above or belov the 502 level, (4) upstde and domslde paraDetere, and (5) coopa!1son
Thig tndex changes dlrectlon earl.ier than the DJIA. When the percentage ts 602 or higher, mrket is entering
an ovelbought area and a change in the l@edlate trend ls not too far avay. This change 1e conflmed by the lndex turning
dom, penetratinS a prevlous botton and/or declining below the 502 level. Thls signlfles a change in the lmediate trend
fron bulllsh to bearleh. When the percentage ls 352 or lower, @rket ls entering an overeold a!ea, and a change in the
lmedlate trend ls not too far away. ThiB change ls conflmed by fhe lndex turnlng up, penetrating a previous top, and/or
rialog above the 502 leveL. Thl6 slgnlfles a change ln the imedlate trend of the @rket fron bearlsh to bulllsh.
This lndicator ehould be uaed to antlclpate or conftm only the l@edlate trend of the mrket vithout any con-
Chart Construction: Each day dlvlde Upeide Volme by the sw of Upslde and Domside Volume. Place the resulting
ratio on a 10-day movlng average. Each squere equls lZ and 3 squres or 3Z are necessary for a change ln directlon.
The lnterpretatlon of this indicator ls siniLar to that of the 10-day Advance-Decllne Ratlo. It often leads the
latter both up and dom. Both of these lndlcators should be {n gear, one confLmlng the actlon of the other.
When the percentage ls 602 or higher, the mrket ls entering an overbought area and a change Ln trend ls not too
distant. This change Ls confl.rmed by thts ratlo turning down, penetratlng a prevlous botton end/or dropplng bel-ow the
502 level.
I'Ihen thls percentage ls 352 or lower, the narket Ls enterlng an oversoLd area and a change ln tretrd should be
expected. This ls conflmed by the ratio turning up, penetratlng a prevj.ous top and/or rislng abwe the 502 level.
This lndlcator ls ueed only to Judge the lmediete market trend, without any conBl.deratlon of whether lt ls
linor, lntemedlate or najor.
2OO.DAY
OJIA MOMENTUMINOE)(
THISINDEX THECURRENT
BY DIVIDING
IS CONSTRUCTED DOW-JONES
INDUSTRIAL BY ITS 2OO.DAY
AVERAGE MOVING
PERCENTAGE
AVERAGE.THERESULTING ONTHECHART. EACHSQUARE
IS THENPLOTTED I% AND3 SQUARES
REPRESENTS OR3%
IN DIRECTION.
FORA CHANGE
ARENECESSARY
MOVING
THE2OO-DAY AVERAGE
LINEIS ALWAYS ABOVE
RULE,A PERCENTAGE
AT IOO. AS A GENERAL IOOINDICATES
ANDA PERCENTAGE
IS IN PROGRESS,
THATA BULLMARKET BELOt,l THATA BEAR
IOOINDICATES MARKET AT
IS IN PROGRESS.
TIMES, A CHANGE
VARIOUS MY BE ANTICIPATED
iN TREND THEIOO LEVELIS PENETRATED
BEFORE ORDOWNWARDS.
EITHERUPWARDS
MARKET
BEAR BOTTOMS TAKEPLACE
USUALLY BELOW AT 78, IN AUGUST
I{ASMADE
85. IN JUNE1962,THEBOTTOM AND
BOTTOM
1966,A DOUBLE
0CT0BER }JASMADE l,lASI4ADE
AT 83; IN MAY1970,THEBOTTOM 1974' THE
AT 80; ANDIN 0CT0BER
IN FEBRUARY
MDEAT 73. HOWEVER,
t.lAS
BOTTOM v{ASMADE
1978,THEBOTTOM AT 89.
AT 87 ANDIN MARCH]980
INDUSTRIAL
DOW-JONES PERCENT
AVERAGE:ONE'YEAR
2/58 Buy @96 Sell 6/59G 134 7/70 9uy G 83 - Sell 6 1 7 1@ 128
l / 6 1 B u y@9 5 Sell l 2 1 6 1G l 1 8 1/74 Buy G 85 - Sell 7/74 @ 87
l l / 6 2 B u yG 8 5 Sell I l / 6 3 @1 1 7 1/75 9uy @76 - Sell ?/76 @ 1 3 5
2/67 Buy @86 Sell I / 6 8 @] 0 5 '|4/78 Suy 0 85 - Sell 4/79 G I 0 4
I Bui 0 93 - sell 2/8? @ 87
INDEX OF SPECULATIVE
CONFIDENCE
This Index is constructedby dividing Standard& Poor's LowPriced Stock Index by S & P's High
GradeCormon
Stock Index. The resulting percentage,or ratio, is plotted on the chart. Eachsquare
representsI% below100 and 2%above100, and 3 boxes(3%or 6%)are necessaryfor a changein direction.
I'lhenthis Index rises, Iow priced stocks are outperforminghigh gradestocks; whenthis Index is
d e c l i n i n g , t h e r e v e r s ei s t r u e .
I'lhenlow priced stocks are outperforminghigh gradestocks, there necessarily is greater public
participation and speculation. Speculativeconfidencein the future upwardtrend of the marketis increas-
ing. tlhenhigh grade stocks are outperforminglow priced stocks and the Index is declining, speculative
.IHIS
I N D E XI S C O N S T R U C TBEYDD I V I D I N GS T A N D A RADN DP O O R ' SG O L DM I N I N GI N D E XB Y T H E I N D E XO F 4 2 5 I N D U S T R I A L S .
--: ; : S | j L T I N GR A T I O ,W H I C HI S A C T U A L LAY R E L A T I V E
-:[ S T R E N G TFHI G U R EO F T H EG O L DM I N I N GG R O U PI,S P O S T E O D N T H EC H A R T
.:.- S C A L ER E V E R S E DE. A C HS Q U A RO EN T H E C H A R TR E P R E S E NIT SP O I N TA N D3 S Q U A R EOSR 3 P O I N T SA R E N E C E S S A R FOY RA
:,-:\':: :\ DIRECTION.
-,:
S C A L EI S R E V E R S ESDO T H A TA N U P M O VIEN T H E R E L A T I V E
S T R E N G TOHF T H EG O L DM I N I N GG R O UW P ILL APPEAR O NT H I S
.-I:-:: I OOI.NI{OF VOE RT H EM A R K EA TS A W H O L EAi N DA D O } ' I N M OI NV ET H E R E L A T I V E
S T R E N G TOHF T H EG O L DM I N I N GG R O UWP ILL
r::;!: : S A I U P H O VFEO RT H EM A R K EATS A W H O L E . G O L DM I N I N GS T O C KA SR E S U P P O S E DDLE -
YF E N S I VIEN C H A R A C T E RS T R O N G
--: rleKET
.F:\ IS }'IEAK A N DW E A K WHEN T H EM A R K E ITS S T R O N G .
SHORTINTERESTRATIO
AFTER
THEre60BEAR THE ttrl: hffitfFlrfl#f-tqql4
MRKET l! lql 4!qA.
0JrAHAD
A vERy suli TfFt l-ffiitr^+++Fffi9l0l-9l 399l]l.
sElEcrrvi
MRKETIN I95I. THISt,lASFOLLOWED
BY 1962BEARMARKET(730 TO 530
_TOPPERFECTLY.
ffi,rffi D R OIPN - D J I AT O P4 3 0 P T ,
DJIAAFTER..ppOP TO FOLLOW.
THETOTAL
BY DIVIDING
IS CONSTRUCTED
THISINDICATOR INTEREST
SHORT DAILYVOLUI'IE
BYTHEAVERAGE FOR
OFTRADING
FORI'IHICHTHESHORT
THEPERIOO IS REPORTED,
INTEREST USUALLY ONTHECHART
30 DAYS. EACHSQUARE
THEPREVIOUS REPRESENTS
OR.15%ARENECESSARY
.0s%AND3 SQUARES rT MY BE FoUND
rN DIRECTToN.
FoRA CHANGE IN BARRoNS'S
oNCEA MoNTH.THESHoRT
RATIOREPRESENTS
INTEREST OF DAYSTRADING
THENUI.IBER CANACCOUNT
THATTHEACTUALSHORTINTEREST POSITIONS
FORIF ALL SHORT
WERE AT THESAI'1E
COVERED TIME.
A COLUMN THEI.9O LEVEL
OFO'S AFTER HASBEEN IS A BULLISH
REACHED INDICATION HASHADA BIG DROP.
IF THEMARKET
1969SIGNALS
THEAPRIL1966ANDOCTOBER I'|ERE HASA SUCCESS
NOGOOD.THISINDICATOR OF 71.4%(5 OUTOF7).
RATIO
A MOVEME
TONIT. O OO RL E S SI S A B E A R I SI N
HDICATION S L A T EI 9 5 6 , D E C E M BI 9E5R9 , N O V E M B E R . I 9 6 l ,
HI G N A LI N
S .U C S
A HIGHSHORT
NOTE:YOUDONOTNEED FORA BEAR
INTEREST TOEND. SEEI973-'1974.I,IHEN
MARKET 7-9 TIMES
WERE
STOCKS
THEREt,lASVERYLITTLE SHORT
EARNINGS COINGTO 4-5 TII4ES EARNINGS
THEMFROM
SELLING,BUTTHATDID NOTPREVENT THEBEAR
WHEN
MARKET
ENDED.
% ol NYSESTOCKSabovolhelr IGWEEK MOVINGAVERAGE
EVERY
TUESDAY,
AT THECLOSE
OFTHEMARKET,
CHARTCRAFT
MAKES
A COMPUTER
TALLYOFTHEPERCENTAGE
OF STOCKS
ABOVE
THEIRIO-WEEKMOVING
AVERAGE,THIS PERCENTAGE
IS PLOTTED
ONTHECHART. EACHSQUARE
REPRESENTS
2%AND3
OR6%ARENEEDED
SQUARES FORA CHANGE
IN DIRECTION.
THISINDEX
IS |^IHAT
IS KNOI,IN
ASA DIFFUSION
INDEX. IT TENDS
TOCHANGE
DIRECTION
AHEAD
OF ITS AGGREGATE.
wHEN
IT STARTS
T0 or[lne FRoM
A HrGHLEVEL,THEAGGREGATE
ltrll suLL coNTTNUE
T0 RIsEANDcoNVERsELy,
wHENrr
BEGINS
TORISEFROM
A LOI,I
LEVTL,THEAGGREGATE
!{ILL STILLCONTINUE
TODECLINE,ONLY
AFTER
THEINDEX
CROSSES
THE
50%LEVEL
DOES
THEAGGREGATE
FOLLOI,I
THEDIRECTION
OFTHEDIFFUSION
INDEX.
UPMOVES
ENDI,IHEN
THEPERCENTAGE
RISESABOVE
THE7OZ,80%OR90%LEVEL
DEPENDING
UPONTHESTRENGTH
OFTHE
BULLMRKET. DOI'JNMOVES
TERI,IINATE
WHEN
THEPERCENTAGE
DROPS
BELOI.,
3O1",2O"IORIO%DEPENDING
UPONTHESTRENGTH
OF
THEBEAR
I.IARKET.
A COLUMN
0F Xs BELO}'I
THE509 LEVELMY BE REGARDED
AS AN UP-ALERT
SIGNAL;I'|HEN
THIS COLUI,|N
0F Xs RISES
A80vE50X0R PENETRATES
A PREVIOUS
TOP,IT l,lAYBE REGARDED
AS AN UP-C0NFIR|I|ED
SIGNAL.A C0LUMN
0F 0s ABOVE
50fl,
grftLD BE TAKEN
As A D0HN-ALERT
SIGNAL;
l.lHEN
THEC0LUMN
0F 0s DECLINES
BEL0W
50U,0RPENETRATES
A PREVIOUS
B0TTOI'{,
:- ITAYBE REGARDED
AS A DOWN-CONFIRI'IED
SIGNAL. BUYINGLONGSHOULD
BEGINl.lHENAN UP-ALERT
SIGNALHASBEENGIVEN
r.'..E THEPERCENTAGE
HASDROPPED
TO 30%ORLOWER.LONG
POSITIONS
SHOULD
BE CLOSED
OUTONA DOIilN-ALERT
SIGNAL
T''iq .1{TPERCENTAGE
HASREACHED
AT LEAST7O%. SHORT
POSITIONS
SHOULD
BE ESTABLISHED
I{HENIT LATER
DROPS
BELOI.I
THE
f,3 r_SYtt.
-102-
1GWEEK MOSTACTIVESTOCKSRATIO
-103-
NYSE BULLISHPERCENTAGE
A S I T S N A M EI M P L I E S T
, H EA B O V E
I N D I C A T OI R
S BASED S T O C KOSNT H EN E t ,Yl |O R K
O NT H ED A I L YP E R C E N T AOGFEB U L L I S H
S T O CE A . S T O C IKS C O N S I D E RBEUDL L I S HI F I T S M O S T
KX C H A N G E R E C E NCTH A R P OFNA P R E V I O U S
T A T T E RSNH O WTSH EP E N E T R A T IO
T O P :A S T 0 C KI S C 0 N S I D E RB
EEDA R I S H
IF ITS MOST T A T T E RSNH O WTSH EP E N E T R A T I0OFNA P R E V I O UBS0 T T 0 M .T H E
R E C E NCTH A RP
N U M B EORF B U L L I S H
S T O C KISS T A L L I E DE V E R Y A N DB E A R I S H .T H I S
D A YA N DD I V I D E DB Y T H ET O T A LO F A L L S T O C KBSO T HB U L L I S H
P E R C E N T AI S
GET H E NP L O T T EODNA 2 %B Y 6 %P O I N TA N DF I G U R E S R 6 %A R EN E E D EFDO R
C H A R T .E A C HB O XE Q U A L2S% , A N D3 B O X E O
r C H A N GI N
E D I R E C T I O NT. H I S I N D I C A T Ol ^Rl A S BD
ORIGINATE Y CHARTCRAF , ., IN 1955.
I NTC
UPMOVE NH EP E R C E N T ARGI S
US U A L LEYN DW H E T E A E7 O % ,O R8 O % ,O R9 0 %L E V E L- D E P E N D I N
EE SA B O V T UGPON T H ES T R E N G T H
'IO%-
INO MOMENTUM
OF THEBULLMARKET.DOWNMOVES TERMINATE IIHENTHEPERCENTAGE DROPS BTLOl,ll3O%,OR 2O%,OR DEPENDING
-'ON THEMOMENTUM
OF THEBEARMARKET.
. L i T T H EC O L U MONF X s R I S E SA B O V T
EH E5 0 %L E V E L ,T H I S M A YB E R E G A R DA
ESDA B U L LC O N F I R MS A H I G HL E V E L ,
EIDG N A L . A F T E R
- _ 1.
A N YU P T U RFNR O M T H E1 0 %L E V E LI S U S U A L LTYH ES I G N A LF O RA N E WE U L LM A R K E T .
BELOW
-104-
BULLISHPERCENTAGE
DOW.JONESINDUSTRIALS
I N T H E3 O - D O ! J
GFEB U L L I S HS T O C K S
A S I T S N A M EI M P L I E S ,T H EA B O V EI N D I C A T O IRS B A S E DO N T H E D A I L Y P E R C E N T AO
BDU L L I S HI F I T S M O S TR E C E NC NH O l ^T
T H A R TP A T T E RS ON
l SH E P E N E T R A T I O F A PRE-
. S T O C KI S C O N S I D E R E
J O N E SI N D U S T R I A L S A
NH O WTSH E P E N E T R A T I o0N
T H A R TP A T T E RS BoTTof' l.
F A PREVIoUS
V I o U ST o p ; A S T 0 C KI S C o N S I D E R EBDE A R I S HI F I T S M O S TR E C E NC
THIS PERCENTAGE
RF B U L L I S HS T O C K ISS T A L L I E DI ' I E E K LAYN DD I V I D E DB Y 3 0 T O O B T A I NT H E B U L L I S HP E R C E N T A G E '
T H EN U M B EO
DO RA R E -
2 %A N D3 B O X E S0, R 6 % , A R EN E E D E F
DN A 2 % B y 6 % p O I N TA N DF I G U R EC H A R T . ( E A C HB O XE Q U A L S
I S T H E Np L O T T E 0
LFDIRECTION.)
V E R S AO
YH E S A M EA S T H A TO F T H EN Y S EB U L L I S HP E R -
OFNT H E D J I B U L L I S HP E R C E N T AIGSEB A S I C A L L T
T H E I N T E R P R E T A T IO
THE
DE M A D EF O RT H E F A C TT H A T , B E I N GB A S E DO N L YO N 3 0 S T O C K S1, T I S M O R EV O L A T I L ET H A N
. L L O W A N CSEHSO U LB
C E N T A G EA
BD
I SE T H A TI T C A NB E C A L C U L A T E IN A
Y T H EA V E R A GTER A D E R
B U L L I S HP E R C E N T ABGAES E DO N A L L S T O C K S . I T S B I G A D V A N T A G
F E WM I N U T E S .
AD
T H E 5 0 %L E V E LM A YB E R E G A R D E
A C O L U MONF X S B E L O W T H I S C O L U MO
S A B U L LA L E R TS I G N A L ;W H E N NF X S E X C E E D S
AD
NF X S O R R I S E SA B O V ET H E 5 0 %L E V E L , I T M A YB E R E G A R D E I G N A L ' A C O L U i l fOl F C S
S A B U L LC O N F I R M ESD
SO L U MO
A P R E V I O UC
AD
T H E 5 0 %L E V E LM A YB E R E G A R D E
ABOVE T H I S C O L U MO
S A B E A RA L E R TS I G N A L ;W H E N E SP R E V I O UC
NF O S P E N E T R A TA SO L U I {O
T IF
O S O R D E C L I N EB AD
T H E 5 0 %L E V E L , I T M A YB E R E G A R D E
SE L O W S A B E A RC O N F I R M ESD
IGNAL.
YI N D ST H E D J I B U L L I S HP E R C E N T AB
MS U A L L F
TO T T O U
A B E A RM A R K EB I O % . A B U L LM A R K ETTO PU S U A L L F
GEEL O W YI l I 3 S
ABOVI70%.
THEDJI BULLISHPERCENTAGE
GENERAL MOTORS AS A BELLWETHER STOCK
General Motors is regarded as a bellwether of the stock market as a whole. The bellwether
theory holds that in a downtrend, whenever 4 months pass without General Motors declining to a
new intermediate low, the odds favor a conclusionthat the market's trend has turned upward.
Conversely,when the trend has beenupward, but 4 months passwithout GeneralMotors rallying to
a new intermediatehigh, the odds favor a conclusionthat the market itself will turn downward. The
theory's originator was StephenJ. Stanford and its present guardian and interpreter is Robert H.
Stovall, of Dean Witter Reynolds,Inc.
It should be borne in mind that no theory or technicalindicator works all the time. Witness the
fact that GM made a low in December 1973and 4 months elapsedwithout GM declining to a new
low. This would haveled to the erroneousconclusionthat the bear market was over. GM then made
a new low in Decembert974. Again GM made a high in April 1976, and then 4 months elapsed
without this high being exceeded.Was the bull market over?No, becauseGM then went on to make
a new high in September.The next intermediatehigh in GM was made in December.Four months
went by without a new high and a bear market signal was given in April 1977.This signal is still
in effect.
-106-
SECTION TWELVE
PUTSAND CAI,LS
Buying
a stock + Buying
a Call
+
0
Writing
a Call 0
The stock buyer gains when the stock rises and loses when the stock declines.
The Call buyer gains when the stock rises and neither loses nor gains when the stock
declines.
The Call writer loses when the gtock rises.and neither gains nor losses when the stock
declines.
The short seller gains when the gtock declines aDd loses when the stock rises.
The Put buyer gains when the gtock declinee and neither gains nor loses when the stock
rises.
The Put writer loses when the stock declines and neither gains nor loses when the stock
rises.
A CaI is an option to buy 100 shares of a specified stock at a fixed price on or before its expiration date.
A Put is an option to sell 100 shares of a specified stock at a fixed price on or before its expiration date.
The exercise price is the price at which the stock under option may be called or put.
The premium or option money is the amount the buyer pays for the option contract.
A straddle is an equivalent number of Puts and Calls covering the same underlying security and having
the same exercise price and expiration date.
Under present practices, each class of options is assigned to one of three expiration month cycles: the
January-April-July-October cycle; the February-May-August-November cycle; or the March-June-Septem-
ber-December cycle. Trading options of a particular expiration month normally coulmences nine months
earlier. No option purchaser can take advantage of the long-term capital gains period for tax purposes.
Exercise prices are generally fixed at 5-point intervals for stocks trading below 50, and 10 point inter-
vals for stocks trading between 50 and 200.
The premium on the price of an option is agreed upon between the buyer and writer of an option or
their agents. Options may be purchased or sold through securities brokers. The premium is determined in
the auction market. Both purchasers and writers pay transaction costs.
The exercise price is not affected by a dividend distribution; dividends are collected by the writer of the
option.
Advantages - 1) The trader or investor can take a larger position in the stock than he might otherwise
be able to. l(X) shares of a $50.00 etockwould cost $5,fi)0; the sorneanount of money can theoretically buy
l0 calls on the snme stock; $5,fi)0 can do the work of S50,000during the contract period. 2) Buying a stock
means making money if the stock goes up and losi'g money if the stock goes down. Buyrng a call means
6nking mon€y if the stock goes up and not losing money if the stock goes down (excluding the premium, of
course, which has already been paid).
Disadvantages - The call must go up in price during the contract period; it may go up afber the con-
trrt period has expired. The holder of the stock has no time limit as to when the stock must move up for
hin ta lsls a profit.
5. Buying a Put vs. Seling the Stock Short
The advantages and disadvantages in buying a Call vs. buyittg the stock apply as well to buying a Put
vs, sellingthe stock short.
In using trading formations as a guide to buying Calls, the time factor is of the utmost importance.
Because of the length of the option contract, the time factor is even more imporiant than percentage of time
a trading formation is profitable and the average percent gain. With this in rnind, trse trading formations
seem to be particularly applicable to buying calls: 1) the Bulligh Triangle fomation, and 2) the Bearish Sig-
nal reversed formation.
Any bearish trading formation may be used for the purchase of Puts. The time element in these forma-
tions ranges from 2.$ months to 4.? months. A &month Put should, therefore, work out satisfactorily. How-
euer, you -ust be sure that a bear market has really begun. Don't buy all your Puts at one time; space them
weeks apart so that you spread your timing as advantageously as possible.
If you prefer to buy a 3-month Put, then restrict your action to the Bearish Triangle formation. This for-
mation is piofitable 87 ,|Vo of the time, for an average percentage gain of.33.3Vo. The average time for such
gain is 2.5 months.
Up to this point, we have discussed the purchase of options as vehicleg of speculations. There is, how-
ever, another use to which optioue can be put-a substitute for stoploss orders. In this case' an option is not
used for speculation but for insurance.
Suppose a person buys 100 shareg of a stock at S50.00 and decides that dl he wants to risk on this pur-
chaseis l07o of his capital (exclusiveof commissions,etc.). He has two altematives: 1) He can place a stop-
loss order at 45, or 2) Buy a Put on the same stod. We will assume he can obtain a six-month Put at $60.00
for al}Vo premium or $500.00.Inboth caseg,he is attemptingto limit his risk to l07o or S6fi).
Advantages of a Stoploes Order - f ) A stoploss order is permanent, it may be kept in effect as long as
fie e@ may be changed, it may be raised as the price of the stock rises and
thus not only limit losses but ingure profits.
Advantages of a Put - 1) Duringthe conhact life of the Put, the trader or investor is uot worried about
being whipsawed out of his basic position in the stock. 2) During the contract life of the Put, the trader or
investor is guaranteed of getting S50.00a share for his stock, no matter how suddenly or violently the mar-
ket may drop.
Disadvantages of a Put - The protection offered by a Put is limited in time; after the Put expires, the
trader or investor will have to buy a new Put or use a stoploss order.
When a person buys a stock and protects his position by a 6-month Put, he has in effect converted his
position into a 6-month Call.
The Option Writer ie a person who sells Puts and Cnlle either as an auxiliary to his investment program
or as a meaDs of speculation. A person who writes or sells a Put erpresses his willingness to buy i certain
stock at a certain price-to have the stock "put" to him at the contract price. A p"rsoo who writei or sellg a
Call erpresses his willingnegs to sell a certain stock at a certain price-to have the gtock "called" from him
at the conhact price.
An option writer who wdfps Qnlle and PuJs as an auxiliary to hie investment program is usually a
"covered
option" writer. A covered Put writer ig one who, so long as he remains oUtigea as a writer, holds
on a share-for-share bagis a Put of the same class as the Put writer where the exercGe price of the put is
held equal or greater than the erercise of the Put written. A covered Call writer is one iho, so long as he
lgpning obligated as a writer, owns the shares of the underlying security covered by the Call, or holde on a
share-for-share basig a Call of the same clasg ae the Call written where the exercisaprice of tire Call held is
equal to or legs than the exercise price of the Call written.
Suppose an inveetor wighes to accumulate shares of a certain oompany. Inslead of buying the stock
imrngdiatlgy, he writes hrte on the gtockg. Ae the writer of the option, he has obligated himself to buy the
stock at a stipulated price during the life of the conhact. For undertaking such an bblgation he receives a
premium. If the stock is "put" fp him, then he buys the stock at the stipulated price; his actual cost, how-
ever, is the price of the gtock less the premium he previously received. ff the stock rises in price during the
term of the contract, and as a regult is not "put" to hin, he pockets the premium. The writer of a Fut hi" to
deposit 6fl maintain a margin of 30Vo of.the price of the s0ock.
Suppoee an investor wishes to distribute stoc,kwhich he had previouely acanmulated. Ingoead of eelling
the stock outright, he writes Qnlle ea the stocl. As the writer of the option, he has obligated himself to seil
the etock at a stipulated price during the life of the contract. For undertaking his obligation he receives a
premiun- If the price of the stock goes up and is ' 'cqllerl " frsp hin, he receives the price of the stock as per
the optioi contract and also pockets the premium previously paid hin. If the etock-drops in price and the
option ie not exercised by the buyer, he pockets the prenium.
The hader or epeculator will sell a Call on a stock which he believes will not rise in price during the con-
tract period or sell a Put on a etocfr which he believes will not decline in price during the conhact perioa. n
the case of a Call, he deposits anfl rnaintnins a 30%nargin and in the case of a hrt, the sane margin ap-
plies. If he successfully judges the price action of the stock during the period of the coutract, he will rot
have the gtocke either "cnlled" from or "put" to hirn 6trd he will pocket the premiuns he received from
writingthe options.
Wherever possible, Cqlls should only be written on stocks in Bearish fonnations and Puts should only
be written on stocks in Bullish fonnations. The option writer may not always have this choice, since oSi,on
trading is usually confined to the most popular and active stocks'
The option writer as a speculator may, however, protect his poeition and cut his losses short after
writing a Put or Call. ff he has written a Put, and the stock has declined lO7ofrom the contract price, he may
proteJ himself by closi.g out his position by buying a Put. If he hass'ritten a Call and the stock has risen
l\qo ,hemay protect himself by closrng out his position by buying back a call.
Options are traded on the Chicago Board Options Exchange ("CBOE"), the American Stock Exchange
(..AMftX"), the philadelphia Stock Exchange ("PHIJ("), the Pacific Stock Exchange ("PSE"), and the
Midwest Stock Exchange ("MSE").
Detailed quotations on options are provided by the above exchanges and printed daily in the Wall
Street Journal and the New York Times.
As of this writing, there are about 220 Calloptions and 20 Put optione. This number is to be increased
in the near future.
A Call or a Put is a diminishing asset. It is an asset for a limited time only and can be diminished in
value as its expiration date approaches.
The purchaser of a Call or a Put, therefore, runs the risk of losing his entire investment (the premiun
he paid) in a relatively short period of time.
The uncovered writer of a Call is subject to a risk of loss should the price of the underlying security
increase. The uncovered writer of a Put who does not have an equivalent short position in the underlying
security is subject to a risk of loss ehould the price of the underlying security decrease.
The writer of a Call who owng the underlying security has, in exchange for the premium, given up the
opportunity for gain resulting from an increase in the price of the underlying security above the exercise
price. The,writer of a Put who has a short position in the underlying security hast in exchange fortbe
premium, given up the opportunity for gain resulting from a decrease in the price of the security below the
exercise price.
Potential buyers of Puts snd Qnlls and potential writers of Puts and Calls should always bear the aborc
risks in mind and realize that trading in Puts and Calls is a highly speculative venture. The only pocatb
conserr/ative use of Puts and Calls is as a substitute for stoploss orders to prevent whipsaws.
With these precautions in mind, the Put and Call trader should always be aware of the trend of tle
market as a whole and the specific chart patterns of the underlying stock.
A potential trader in hrts and Qnlle slsuld be thoroughly acquainted with the underlying dod b .
taking a position in.
He should know whether the underlying gtock ie bunish or bearish; what its upside or dclib F
objective is. He should also be familirar with its relative momentum (strength)-the Vo itis above or below
its B0-week moving average. He should also be familiar with its Beta or volatility factor. The higher the Beta
the more volatile the stock. This is important besause an option is limited in time.
The Charkraft Options Chart Book, published quarterly, can help you with the above factors. A sample
chart is reproduced below.
20
I9
l8
l 7
I6
I5
ll
l2
II
lo
I
1
6
SECTION THIRTEEN
COMMODITY TRADING
point and figure chartson grains and other commoditiesare constructedin the same manner as the charts
units of charting have to be worked
on stocksexceptthe units of charting are different for eachcommodity.The
whipsaws are as few as possible'In
out in such a mannerthat not only a-rebuy and sell signalsgiven, but that
pJrcentage of unprofitable trades than in stocks' so it is
trading in commoditiesone must expect a greater
extreriely important to keeplosses small while letting profits run'
i l L
1 BULLISS L INE
HUPPORT
i:-i+fff'
S E L LB U TDO
-113-
WHEAT
5/28/BL
Wheat and the grains markets have been characterizedby large bull and bear markets in
recent years. Signalsin line with thesemain hends have been very profitable.
-114-
GRAINS
COBN
OATS
SOYBEANS
t r l l l
5+/box
SOYBEANMEAL
SOYBEAI| (IL
GOLD
coLD ( cl4x
) DECEMBER
1982 LIFE OF CONTRACT
" - _ .r :/ 3 0 / 8 1
E@ oqo.
€i7{,
54/box
Gold and other precious metals make substantial moves, both up and down,
and, as a
result, have attracted a big following among speculators.
-I16-
METALS
PLATINUM
HOGS
J U N E1 9 8 2 ( cB T ) LIFE OF CONTRACT
: :=+3/I/81
r#JTtrading
. . _ _ fb e g i n s1
, - ' - + r - . 1 + ! l l
.2tlbox1r-'-:
, ...lT-
Hogs and other meatshave had spectacularbull and bear marketswhich have turned quick-
ly. Note the small length of time it took to completethe bottom formation.
FROZEN PORK BELLIES
CATTLE
FROZEN ORANGE JUICE
FROZENORANGE
JUICE
cocoA
POTATOES
BY
S. TREASUR ILLS ( r M r i ) JUNET9B2 LIFE OFCONTRACT
Financial futures are a recent addition to commoditiesmarkets, but their popularity was
immediate.
I
n
_ t
CHANTCRAFTCOMMODTIES SERVICE
-L24-
SECTION FOURTEEN
In Figure # 54 we have the chart of a stock that has announced a two for onc sTffL
The original price sdale appears on the left hand side of the chart. The first thing to &
when you want to adjust a chart for the split is to draw the new scale on the right haqd
side of the chart. In the case of a2 for 1 split, you simply cut the.price of each squarc
in half. Using the right hand price scale, you now have a chart in f -point units witb a
1] point reversal both below and above the 20 price leveI.
The next step is to draw a new and correct price scale in j-point units belor 2O
and in 1-point units above 20. This is illustrated in Figure # 55. Working with the |-
point units in the old chart you draw your new chart according to the correct units. Thi6
has been done in Figure # 55. If you will trace each movement on the new chart and
compare it with the old chart you will soon learn how this is done.
Do not adjust a chart for less than a 10% stock dividend. If a stock has been split
3 for 2, each square is multiplied by 2/3rds, if it has been split 3 for 1, then each
square is multiplied by 1/Srd, etc.
In adjusting a chart, it should always be borne in mind that many of the chart pat-
terns in the old chart will disappear in the new chart. Sometimes, an adjustment will
even change a chart from bullish to bearish and vice versa.
-L25-
SECTION FIFTEEN
On the facing page we have two charts of Natomas covering the same time
period. The upper one is a 3-point reversal chart and the lower one is a S-point
reversal chart.
The 3-point reversal chart is spread over forty-four columns while the 5-
point reversal chart is condensed into eighteen columns. The 3-point reversal chart
gave ten buy and sell signals; the 5-point reversal chart gave only five such signals.
The 3-point reversal chart has four Bearish Resistance Lines; the 5-point reversal
chart has only one Bearish Resistance Line which is still in effect.
Although the 3-point reversal chart works very well about 90% of the time,
there are some stocks which should be charted on a 5-point reversal. These are
usually the higher priced stocks, the very active stocks, and the so-called "glamour"
stocks. In such stocks the 3-point reversal method still shows minor moves; it
takes a 5-point reversal chart to eliminate them.
The long-term investor might also use the 5-point reversal chart on almost
all stocks, while the short-term trader must use the 3-point reversal chart.
The 5-point reversal chart is constructed from the 3-point reversal chart
by eliminating all moves under 5 points.
T h e N A T I O N A L L YF A M O U S
O R G A N I Z A T I O NO F F E R ST H E S E E I G H T
O B J E C T I V E SF O R E V E R Y I N V E S T O R
"For
over 30 years, CHARTCRAFT, the innovator in POINT AND FIGURE
CHARTING, hassupplied the investor with charting toolsfor his every need." l?
A. W. Cohen l6
l5
1 . Keephis owngtocksunderconstantsupervision.
2 . Spot"buy forrnations"andsignalsin otherstocks.
Ir
"sell r:
3 . Watchtor signals"in otherstocks. L2
4 . Formulate price objectives. lt
5. Beforewarn€dof resistanceareas.
6 . Foreseesupportar@s.
7 . MonitortheoveralI trendof the market,OJIA,etc.
L Possess a visual historyof every NYSE,ASE and all popularOTC stocks,alongwith rnanytchnical indicato6,
commodities, andoptions.
The "Chartcraft Point and Figure Method" can help the investorattain th€so eight importantobjetives-
becauseit is adaptableto manyapplications.Belowis a thumbnailsketchof the availableP&F materialsyoucan use
to trademoreknowledgeably. Act now-while the marketis sovolatile.Ordera low-pricedtrial subocriptionto oneof
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! Bi-MonthlyWeekly
Bar ChartsBook . 20.00 1@.m
O QuarterlyOTCP&FChartbook.. . 20.00 72.@ AuthorizedSignature lf Charge
O 1 year NYSE/ASEWeeklyService& Monthly
ChartbookCombination $360.00
) lencloseacheckfor$ in full payment.
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NowThreesupplements
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contents end authors of this fabulous694-page Encyclopediaof The authors in this Encyclopediacome from the entire field of
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l
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to provide within the compassof a singlevolume a comprehensive appearfor the f irst time. This new editionwill proveas interesting
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and investorsover the years to realize income and appreciation 1977,and 1980.
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describein detail one particularmethod,this is the only source lished in loose-leafformat_topermit periodic updating of articles
which cuts acrossthe entire field: charting,fundamental,tech- without tiffig to rep?int the entire book. lt will also permit the
nical, and specializedapproaches. addingof articlesby new authors.This will resultin a bookthat is
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T H I S E D I T I O N I N C L U D E ST H R E E S U P P L E M E N T S
TABTE OF CONTENTS
Hor to Empby Mrrtct Tim ClcLr ior Mm Aocurr3e Tteding Burinc[ md tlod Mrrlct C]clo-A FmtingTool M oving Avcnger Appro.ch 3oPrfii. in ths Stcl Mut t
by GenH Appel by Rondd nobtsin by CunLr Drhl
Inlorncdirtc T.rm Trend lndicetor Merlet end Corponle Fudmontde PncaiolYrrdrticlr for Scleting rnd Evduting Grclth Stodr
by W. V. Beny by Eric Scheeiar by Loo Eucr
Non.f,rndorn Mou ud tho ShoilT{tnTtrdhg lndet The Strrtcgic ud Trcticd U*r of (bnbrry Opinion Point rnd Figruc fomrtionr Mrdc Eery
by Nechu Earch by Bndbury K. Thurlw by A. W. Cohsn
lntrrdry btoruity Inder The Curtomor'r llac Credi3 Bdmr ud Mugin llcba Don'i Go Wlh th. hos
by Drvkl B. Baairn, Jr. by Slorn J. Wibon by Devid lhcnen
Contrr-Cyclhd Inwrting Thc CBOE Cdl Option-A Buyer'rTol fc H or to Bc Yqrr Own lnvsrtut Courelor
by Frul H.8ud, Jr, Conrervrtive Werf, h Aoormuletbn Dicl Plbiea
A Long Tcm Sludy o[ Invgrtocnt Advicc lor Sorll Inwrtorc by Kemit C. Zeig. Jr. ProfitBu Syetcm
by Hrrhn L. C:hrmy Merlet Anrlyrir by Willrcd R. Gcorgt
Prrcticrl lelrtive Sfruryth Chming . by John M. Coper Stocl Trrdcr'r ln&r
by E. S. C. Coppcl Mrthemrt&rl Approrch lo Inyerting by Elerr Ho
Pricc rnd Tinre by Homor Fehmer Point rad Figuc Clunr end Moviag Averegoe
by lomld L. Drnul Countr Fron the Middlo Sectim by Drvid L. Uprhrw
A Strrtcgy for All Scaaro by Georgs Lindny Thc Sbort Tem Trrding lnder
by Wrliar H. Fotor Mrrlct Philmophy by John f,. McGinky, Jr.
The Timing Fmtor in Eurims end $ocl Mulct Fomding by S. B. Lurie Br.ic Tcnotr of tho Elliott Wrv. Primipb
by Anthmy Grubir Mon.ntum Aillyrir of Comm $oclr by loben f,. Prccbtor ud A. Joha Flora
Techniquer of Oplion Trrding by CrrlronG bttr lnt€rDr.riDt 3h. goct Mrrtcr Dry-By-Drt
by Frcdric Goodntn Serronel Tendencier in $ocl hico bt Gcorgc Lindry
600% Mrrlet Mm }{or ln hogco: Dc ilatby the 198& by Arthu A. Menill Vrlue-Wcighled Pur-To4dl nrtio
by Yrle Hir*h W!11 atr6t W*L: Tchnicl Mrrtctlnder by Lerry V. Untcrbrinl
Intcrert Rata ud Stocl Mrrtet TEnd! by RobertJ. Nurcl Lrrta Blct Tnuclionsr A Prcmisr Conttrry Indicrlor
by Chrrhr M. hloggir Genord Moton u e Stod Mrrlca Bellrotlrc by Dudlat f,. Bohlen
Bar Chrrtr u u Aid ro Dscirion-Mding by Bobort H. tllovrll Brttlo of aho Eulb end thc Eerr
by John Mrgw An Approrch to Vdue Thrugh Yield-Dividendr by Willrcd bDour
Spoltint Mrrlca Trsnd Chrngrr by Fred Whitmore A Contrrry O$nioo lndiqtor
by Sbnby C. MrrsaL by Abrehm W. Cohen