uptrend.MASONITE. 1956 downtrend showingSupport–Resistance phenomena.DELAWARE, LACKAWANNA & WESTERN. Rectangleand uptrend. 1954 to 1955.AMERICAN LOCOMOTIVE. Rectangle with false move,and subsequent upside breakout and advance.FANSTEEL METALLURGICAL. Weekly, 1955 to 1956.Showing Ascending Triangle, reactions to Support, andeventual uptrend.TEXTRON. 1956 to 1957. Descending Triangle, with sharpdecline after the breakout.LIBBY, McNEILL & LIBBY. Monthly, 1927 to 1930.Showing continuance of Bullish Trend into 1930.
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Technical Analysis of Stock Trends
Figure
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CHRYSLER. Monthly, 1927 to 1930. Showing Major Topin 1928 and the collapse during the early months of 1929.EAGLE–PICHER LEAD. Monthly, 1927 to 1930. GenerallyBearish Major Trend.WEST INDIES SUGAR. Monthly, 1953 to 1956. Showingcontinuance of Bullish Trend through 1956.WESTINGHOUSE ELECTRIC. Monthly, 1953 to 1956.Showing Major Top in 1955 and the collapse during theearly months of 1956.S.S. KRESGE. Monthly, 1953 to 1956. Generally BearishMajor Trend.NORTHROP AIRCRAFT. 1954 to 1955. DescendingTriangle at an important top.NORTHROP AIRCRAFT. 1956 to 1957. AscendingTriangle and upside breakout.CHICAGO, MILWAUKEE, ST. PAUL & PACIFIC. Themagnificent uptrend of 1954 to 1955 with numerousSupport–Resistance and Area Pattern features.WESTINGHOUSE ELECTRIC & MANUFACTURINGCOMPANY. Downside trend in the early stages of the1955 to 1956 collapse.OTIS ELEVATOR. 1954 to 1955. Showing a full year of atypical daily chart on TEKNIPLAT charting paper. Showsa long Triangle Consolidation, eventually followed by acontinuation of the Major Advance.The DOW–JONES INDUSTRIAL AVERAGE. Daily chartshowing the Broadening Top established in May toAugust 1957.The DOW–JONES INDUSTRIAL AVERAGE. Daily chartshowing the Broadening Top established in 1999–2000.INDUSTRIAL RAYON CORPORATION. ShowingBearish action of a stock through the entire year 1957.Daily chart.LORILLARD. Showing Bullish action of a stock throughthe entire year, 1957. Daily chart.AVNET ELECTRONICS CORPORATION. May throughOctober 1961, showing Bearish Trend during a time whenthe market Averages were strong. Daily chart.BURNDY CORPORATION. April to September 1961.Classic Head-and-Shoulders Top and rallies to neckline.Daily chart.BRUNSWICK CORPORATION. Showing the end of thegreat Bull Market Move in this stock, and the declinewhich followed. 1960 to 1962. Weekly chart.
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List of Illustrations/Diagrams
719
Figure
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POLAROID. First 6 months of 1962. Long Rectanglefollowed by a precipitous drop after penetration ofSupport. Daily chart.COPPER RANGE. First 6 months of 1962.Head-and-Shoulders Top with down-sloping neckline.Daily chart.U.S. SMELTING, REFINING & MINING. April throughSeptember, 1962. Head-and-Shoulders Bottom, breakout,reaction, and advance. Daily chart.The DOW–JONES INDUSTRIAL AVERAGE. Weekly, July1961 through June 1962. The massive Head-and-ShouldersPattern preceding the 1962 break.ABC VENDING CORPORATION. Daily, April toSeptember 1963. Head-and-Shoulders Top and MajorDowntrend.CERRO CORPORATION. Daily, January to June 1963.Symmetrical Triangle and uptrend, showing reaction to“cradle point.”CRUCIBLE STEEL. Daily, March to August 1963.Ascending Triangle, showing Breakaway Gap.SUPERIOR OIL. June to November 1962. Showing animportant Double Bottom, which became the base for aMajor Advance.GENERAL STEEL INDUSTRIES. Daily, November 1962to April 1963. Example of a Major Uptrend with normalreactions.UNITED ARTISTS. Daily, February to August 1963. AMajor Downtrend, demonstrating Resistance Levelsduring the decline.UTAH–IDAHO SUGAR COMPANY. January to June1963. Breakout and rapid advance appearing suddenly ina normally dull stock.CONTROL DATA CORPORATION. Daily, February toAugust 1965. Example of a Wedge with downsidebreakout and Major Collapse.U.S. SMELTING, REFINING & MINING. Daily, July toDecember 1965. Breakout from dormancy, MajorAdvance, showing Symmetrical Triangle Consolidation.LIVINGSTON OIL COMPANY. Weekly, January 1965 intoJanuary 1966. Downside Major Trend, SymmetricalTriangle Bottom, Major Reversal to uptrend.PACKARD–BELL ELECTRONICS. Daily, August 1965 toJanuary 1966. Flag showing “Half-Mast” situation, and alarge Ascending Triangle with powerful breakout moveon the upside.
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Technical Analysis of Stock Trends
Figure
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PARKE, DAVIS & COMPANY. Daily, July 1969 to June1970. This could be regarded as a very flatHead-and-Shoulders Top, or as a long Rounding Top.ASTRODATA, INC. Daily, October 1969 through February1970. A complete collapse; then reopens 20 points lower.ORACLE. Lest one think that the air pocket gap does notstill exist, here is an example from the turn of the century(third millennium).PUBLIC SERVICE ELECTRIC & GAS. Monthly, 1969through 1970. A typical electric and gas utility stock.MEMOREX CORPORATION. Daily, September 1969through May 1970. Last “Bull” fling for Memorex beforegapping down with volume in February 1970.FLYING TIGER CORPORATION. Monthly, October, 1969through 1971. From the 1967 high of 48½, “FLY” starteda downtrend that lasted 2 years and took the stock downto 11¼.ACTION INDUSTRIES. Daily, November 1971 to April1972. A large Ascending Triangle formed after an advanceof 90%, and followed by a breakout and a further advancepractically duplicating the first one in percentage gain.DELL COMPUTER. From nothing (a college dorm) tosomething.DELL. Air pockets return.INTEL. The heart of the Microsoft computer. CompareMSFT.NOKIA. The story of the communications revolution.AMD. Intel’s counterpart.YAHOO. Internet rocket fuel.YAHOO 2005. After the tulipomania.APPLE COMPUTER. The revenge of Steve Jobs.APPLE 2005. The press’ whipping stock strikes back.NDX. A ten year trade using Basing Points.APPLE. Illustration of Basing Points in 1987 Reagan Crash.
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List of Illustrations/Diagrams
721
Text DiagramsThe charts listed as Figures all represent actual market history. In contradistinction, the diagrams listed below do not depict real trading history, buthave been specially drawn as simplified, hypothetical market situations tofacilitate the explanation of certain trading principles. EN: Certain of theserather than drawings are exhibits of other interest.
Diagram
1234567891010.111121314
Hypothetical daily chart illustrating the failure of oneaverage to confirm the other in making a Dow Theory signal.How a Head-and-Shoulders Top reversal pattern forms. Theessential elements.Trendline in rising market and parallel to it. (Referred to asRed Trendline and Red Parallel.)Return line in rising market and parallel to it. (Referred toas Blue Trendline and Blue Parallel.)Trendline in declining market and parallel to it. (Referred toas Blue Trendline and Blue Parallel.)Return line in declining market and parallel to it. (Referredto as Red Trendline and Red Parallel.)Example of trend action, showing decline, reversal,consolidation, advance, top, and downside breakout.Diagrams of the principal preliminary buying signals asshown by trend action.Diagrams of the principal preliminary signals for short salesas shown by trend action.The Evaluative Index. Weekly, 1961, January throughDecember 1961.Evaluative Index from Magee Market Letters.Price scales for TEKNIPLAT chart paper.Formula for Calculating Volatility.Risk Analysis.Profit Analysis.
Tables1The Dow Theory’s 60 Year Record.1.1The Dow Theory’s Record to 2005 Longs Only.1.2The Dow Theory’s Record to 2005 Longs and Shorts.
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AU3772_A007.fm Page 722 Sunday, November 19, 2006 2:46 PM
Alphabetic Index of Stock Charts
Figure Stock Name
Summary Description of Chart
Page
84
30-YEAR TREASURYBOND FUTURES,MARCH 1997.
Triangle Patterns indicating approachingmarket breaks in 30-year Treasury Bondfutures. Volume, Support, and Resistanceare also discussed in this 1996 chart.
148
194
30-YEAR TREASURYBOND FUTURES,MARCH 1997.
A 1-day Relative Strength Indicatorshowing overbought above 70 andoversold below 30.
664
191
30-YEAR TREASURYBONDS, MARCH 1997,FUTURES.
Chart illustrates volume trends on 30-yearTreasury Bond futures and discusses somedifficulties of using volume as an indicatorwith futures.
659
192
30-YEAR TREASURYBONDS, MARCH 1997,FUTURES.
Description of futures open interest risingor declining and the 1996 indications forTreasury Bonds.
661
205.3
3COM.
Underwriters cleverly only threw 3% of3Com-owned Palm stock onto the marketat the IPO.
409
130
A.O. SMITHCORPORATION.
A technically significant (Runaway) Gap in1946 decline. Weekly chart.
225
257
ABC VENDINGCORPORATION.
Daily, April to September 1963.Head-and-Shoulders Top and MajorDowntrend.
546
273
ACTION INDUSTRIES.
Daily, November 1971 to April 1972. A largeAscending Triangle formed after anadvance of 90%, and followed by abreakout and a further advance practicallyduplicating the first one in percentage gain.
564
87
AIR REDUCTION.
The classic Broadening Top of 1929.
156
93
ALLIED STORES.
Flat-topped Broadening Pattern of 1945,and Breakout Gaps.
163
215
ALLIED STORES.
Daily, last half of 1946. SymmetricalTriangle Consolidation in decline; alsosmall Head-and-Shoulders ContinuationPattern.
482
722
AU3772_A007.fm Page 723 Sunday, November 19, 2006 2:46 PM
Alphabetic Index of Stock Charts
723
Figure Stock Name
Summary Description of Chart
Page
114.1
ALTRIA GROUP (MO).
2005 gaps and flags galore. Chartist’s joy.
201
205.7
AMAZON.
Weekly. Internet dreams of glory.Documenting the great Internet bubble.Blow-off and hangover.
413
205.7.1 AMAZON.
Daily. Details of the blow-off with sometechniques to profit and not suffer.
414
205.7.2 AMAZON.
2005. Rolls on. Biggest river in world. Notof profits.
415
273.4
AMD.
Intel’s counterpart.
569
30
AMDAHLCORPORATION.
Complex Head-and-Shoulders Bottom,1984.
86
117
AMERICANA Head-and-Shoulders Consolidation& FOREIGN POWER 2D Pattern of 1945.PFD.
204
34
AMERICAN& FOREIGN POWER2ND PFD.
89
81
AMERICAN AIRLINES. Weekly Chart. Bull Market Top of 1945 to1946, a form of Double Top.
145
55
AMERICANBANKNOTE.
The Major Bottom Reversal of 1941 to 1942.
113
95
AMERICAN BOSCHCORPORATION.
A Diamond Pattern in 1945 whichfunctioned as a Consolidation.
164
210
AMERICAN CABLE& RADIO.
Placement and change of stop-order levels.
442
221
AMERICAN CAN.
Daily, end of 1946, beginning of 1947.Diamond Formation at top of Secondaryrally.
490
173
AMERICAN CAR& FOUNDRY.
Up-curving Bull Trend of heavy industryissues. Monthly chart, 1938 to 1946.
287
26
AMERICANLOCOMOTIVE.
Extended top of Multiple type, 1946.
83
115
AMERICANLOCOMOTIVE.
A Flag in 1935 which appeared to fail butfinally came through.
202
233
AMERICANLOCOMOTIVE.
Rectangle with false move, and subsequentupside breakout and advance.
519
66
AMERICAN ROLLINGMILL.
The “hybrid” pattern of ascending typewhich formed in 1941 to 1943. Weekly chart.
125
A Rounding Bottom formed in 1945.
AU3772_A007.fm Page 724 Sunday, November 19, 2006 2:46 PM
724
Technical Analysis of Stock Trends
Figure Stock Name
Summary Description of Chart
Page
88
AMERICAN ROLLINGMILL.
Small Broadening Top of 1946 at the end ofa generally broadening (and Bearish)Formation.
157
35
AMERICAN SAFETYRAZOR.
Monthly chart. Two Major Bottoms — aHead-and-Shoulders in 1932 and “Bowl” in1942.
90
226
AMERICAN STEELFOUNDRIES.
Daily, 6 months in 1947. Parallel TrendChannels in Primary and Secondarydirections.
499
122
AMERICAN WATERWORKS & ELECTRIC.
Common or Pattern Gaps in a Rectangle;Runaway Gap and Flag. 1945.
213
114
AMERICAN WOOLEN. Perfect “Half-Mast” Pattern in 1946, withgaps and Ascending Triangle.
200
74
AMERICANZINC, LEAD& SMELTING.
The Consolidation Rectangle whichfollowed a Head-and-Shoulders Top in1946.
137
116
ANACONDA COPPER.
Head-and-Shoulders Consolidations in1936, and measuring Flag.
203
110
ANACONDA COPPER.
Wedge or Pennant, Flag and RunawayCaps in 1936–37.
195
274
APPLE.
The press’ whipping stock strikes back.2005.
573
273.6
APPLE.
The revenge of Steve Jobs.
572
102.1
APPLE.
Panic selling and climax in Apple, 1987Crash.
174
41
APPLIED MAGNETICCORPORATION.
1988. Saucer-like Pattern.
95
28
ARCHER DANIELSMIDLAND COMPANY.
1984. Complex Head-and-ShouldersBottom.
85
160
ARKANSAS BEST.
Fan and Head-and-Shoulders Bottom.1987.
274
60
ARMOUR& COMPANY.
Long Ascending Triangle in 1946 to 1947 inwhich distribution eventually overcameupward trend.
118
213
ASSOCIATED DRYGOODS.
Daily, first half of 1946. Rounding Top; alsoBroadening Consolidation.
479
220
ASSOCIATED DRYGOODS.
Daily, first half of 1945. Right- AngledBroadening Formation and ensuingadvance.
489
AU3772_A007.fm Page 725 Sunday, November 19, 2006 2:46 PM
Alphabetic Index of Stock Charts
725
Figure Stock Name
Summary Description of Chart
Page
91
ASSOCIATEDDRYGOODS.
Right-Angled Broadening Formation withhorizontal Top, 1945.
160
269
ASTRODATA, INC.
Daily, October 1969 through February 1970.A complete collapse; then reopens 20points lower.
558
148
ATCHISON, TOPEKA& SANTA FE.
Acceleration of Intermediate Uptrend in1936. Support Levels.
257
147
ATLANTIC REFINING.
Basic Intermediate Trendlines on weeklychart, 1944 to 1947.
255
250
AVNET ELECTRONICS May through October 1961, showingCORPORATION.Bearish Trend during a time when themarket Averages were strong. Daily chart.
538
163
BACYRUS ERIE. 1984
Excellent Fan Pattern.
278
131
BALTIMORE & OHIOPFD.
Small Island in right shoulder of MajorHead-and-Shoulders Top. 1946.
226
127
BALTIMORE & OHIO.
The measuring formula applied to aRunaway Gap in early 1937.
221
204
BALTIMORE & OHIO.
Weekly, first 6 months of 1945, showingtendency of a low-priced stock to makewide swings in a general market move.
397
161
BARBER ASPHALT.
Application of three-fan principle to BullMarket Reaction. 1946.
276
210.1
BASING POINTS.
The most important chart in the book?
448
62
BATH IRON WORKS.
Descending Triangle Top of 1946, showingadjustment of pattern lines forEx-Dividend Gap.
121
76
BELL AIRCRAFT.
Ex-dividend drop causing apparent falsemove out of Rectangle in 1945.
139
136
BENDIX AVIATION.
Support–Resistance Levels in anIntermediate Uptrend. 1944 to 1945.
237
133
BETHLEHEM STEEL.
Unusual Island Reversal at the 1937 BullTop.
228
153
BETHLEHEM STEEL.
Trend Channels and Rectangle. 1945.
266
123
BETHLEHEM STEEL.
Three types of Breakaway Gap. 1937.
216
126
BLAW–KNOX.
Gaps following long Rectangle in early1946, and Major Double Top.
220
212
BRANIFF AIRWAYS.
Daily, last half of 1945. Head-and- ShouldersBottom, reactions, Ascending TriangleConsolidation and advancing trend.
478
AU3772_A007.fm Page 726 Sunday, November 19, 2006 2:46 PM
726
Technical Analysis of Stock Trends
Figure Stock Name
Summary Description of Chart
Page
57
BRIGGSMANUFACTURING.
Weekly chart of 1941 to 1943 showingTriangular Bottom of ascending type.
115
109
BRIGGSMANUFACTURING.
Bull and Bear Flags and SymmetricalTriangle Top in 1936. Support–Resistancephenomena.
194
252
BRUNSWICKCORPORATION.
Showing the end of the great Bull MarketMove in this stock, and the decline whichfollowed. 1960 to 1962. Weekly chart.
540
36
BUDD COMPANY.
Monthly chart showing Major RoundingBottom of 1942.
91
25
BUDDMANUFACTURING
(now The Budd Company). MultipleHead-and-Shoulders Top of 1946.
82
251
BURNDYCORPORATION.
April to September 1961. ClassicHead-and-Shoulders Top and rallies toneckline. Daily chart.
539
199.1
CBOT DOW INDEXFUTURES ANDDIAMONDS.
Hedging DIAMONDS with index futuresillustrated.
342
199.2
CBOT DOW INDEXFUTURES ANDOPTIONS ONFUTURES.
Using options and futures to controlportfolio risk.
346
56
CELANESECORPORATION.
Ascending Triangle of consolidation typein 1946.
114
174
CELOTEX.
Accelerating uptrend of a low-pricedbuilding supply stock. Monthly chart, 1938to 1946.
288
258
CERROCORPORATION.
Daily, January to June 1963. SymmetricalTriangle and uptrend, showing reaction to“cradle point.”
547
217
CERTAINTEEDPRODUCTS.
Daily, 6 months in 1946. Broadening Top,showing rally following the breakout, andsubsequent decline.
485
37
CERTAINTEEDPRODUCTS.
Monthly chart. Major Rounding Bottom of1942.
91
244
CHICAGO,The magnificent uptrend of 1954 to 1955MILWAUKEE, ST. PAUL with numerous Support–Resistance and& PACIFIC.Area Pattern features.
526
11
CHICAGO,The Head- and-Shoulders Top FormationMILWAUKEE, ST. PAUL which ended its Bull Market in February& PACIFIC.1946.
63
AU3772_A007.fm Page 727 Sunday, November 19, 2006 2:46 PM
Alphabetic Index of Stock Charts
727
Figure Stock Name
Summary Description of Chart
Page
237
CHRYSLER.
Monthly, 1927 to 1930. Showing Major Topin 1928 and the collapse during the earlymonths of 1929.
522
205.8
CISCO.
Exercises in adroit speculation.
416
205.8.1 CISCO.
Zooming in on Cisco.
417
175
CLAUDE NEON.
(Curb Exchange). Strongly up-curved BullTrend of a low-priced, highly speculativeissue. Monthly chart, 1938 to 1946.
288
150
COMMERCIALSOLVENTS.
Intermediate Downtrend and Uptrend in1946.
261
119
COMMONWEALTHEDISON.
Scalloping trend of an investment stock,1945.
206
168
COMMONWEALTHEDISON.
Straight-line Bull Trend of investment typeutility. Monthly chart, 1938 to 1946.
285
16
CONSOLIDATEDEDISON.
The Head-and-Shoulders Reversal of 1937.
68
157
CONSOLIDATEDVULTEE.
Part of a two-year Uptrend Channel. 1945.
271
82
CONTAINERCORPORATION.
The Major Double Bottom of 1941 to 1943.Weekly chart.
146
216
CONTINENTALMOTORS.
Daily, last half of 1945. Ascending Triangleshowing Pullback to Support Level; alsoSymmetrical Triangle with reaction toapex.
484
264
CONTROL DATACORPORATION.
Daily, February to August 1965. Example ofa Wedge with downside breakout andMajor Collapse.
553
254
COPPER RANGE.
First 6 months of 1962.Head-and-Shoulders Top withdown-sloping neckline. Daily chart.
543
181
CORN FUTURES,MARCH 1997.
Daily chart showing Symmetrical Trianglesand well-defined downtrend. This dailychart stresses the importance of checking aweekly chart. (See Figure 183.)
643
193
CORN FUTURES,MARCH 1997.
Chart showing 14day Relative Strength“Swing Failures” with buy and sell signalsfor the March, 1997 Corn Futures as ofDecember 1996.
663
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Technical Analysis of Stock Trends
Figure Stock Name
Summary Description of Chart
Page
180
CORN FUTURES,MARCH 1997.
Support and Resistance levels are clear onthis Corn Futures chart of daily prices.
641
190
CORN FUTURES,MARCH 1997.
Stochastic Lines near zero can lead toerroneous belief in a Reversal. The chartshows the lines near zero without aReversal and points out an interpretationof weakness being the logical conclusion.
657
206
CORN PRODUCTSREFINING COMPANY.
Weekly, 1945 to 1946. Habits of a stock oflow sensitivity.
420
177
CORN PRODUCTSREFINING COMPANY.
Typical Major Uptrend of food group.Monthly chart, 1938 to 