01-203
using three, 204
using two, 203-204
which prices to average, 197-198Moving average envelopes, 207-208Multiple positions, trading, 398-399Mutual funds, 410-411
and intermarket analysis, 422
NASDAQ composite, 435, 449-451
Nature’s Law—The Secret of the Universe,319, 334
Nearest Contract, 506
Near term trend, 52-54
Neill, Humphrey B., 258
Nelson, S.A., 24
Neutral day, 484-486
New Concepts in Technical Trading Systems(Wilder), 239, 469
New High-New Low index, 440-442
New York Stock Exchange Index, 449-451
Next Contract, 506-507
Nominality, principle of, 353-355
Nonfailure swing, 30-31
Normal day, 484-486
Normal variation day, 484-486
On-balance volume (OBV), 165-167One-third retracement, 85-87On Neck Line candle pattern, 316, 317Open Arms Index, 446Open interest, 35, 42-44, 159-162
defined, 159
in futures, 42-44, 159-161
how changes occur in, 160-161
interpreting:
in futures, 169-174general rules for, 161-162
in options, 177
put/call ratios, 178-179
as secondary indicator, 159-162Oppenheimer Real Assets, 410Optimization, 220-221, 496Options, open interest in, 177Options hedging, 8Oscillators, 223, 225-263
Commodity Channel Index (CCI), 237-
239constructing, using two moving aver-ages, 234-237538
Index
 
Oscillators (cont.)Contrary Opinion, 257-261interpretation of, 226-227Investor Sentiment Readings, 261-262Investors Intelligence numbers, 262-263Larry Williams %R, 249momentum, measuring, 228-233Moving AverageConvergence/Divergence (MACD),214, 252-255MACD histogram, 255moving averages as, 214rate of change (ROC), measuring, 234Relative Strength Index (RSI), 239-245interpreting, 242-24570 and 30 lines, using to generate sig-nals, 245-246Stochastic oscillator, 246-249and trend, 226-228importance of, 251usefulness of, 251-252uses for, 227See also Contrary OpinionOutside day, 92
Parabolic System (Welles Wilder), 378, 380,381-384, 390Peaks, time between, 125Pelletier, Robert, 184Pennants, 141-145construction of, 142-143measuring implications, 143-144Percentage envelopes, 207-208Percentage retracements, 85-87, 402Fibonacci, 86, 336-338Perpetual Contract, 184Piercing Line candle pattern, 303,311Pioneer range, 484Point and Figure Charting (Dorsey), 292Point and figure charts, 37, 38, 265-296advantages of, 288bar charts compared to, 266-270computerized charting, 292-294horizontal count, 274-275intraday, construction of, 270-273Moving averages, 294-295price patterns, 275-277technical indicators, 2923 box reversal, 277-282
trading tactics, 286-288trend analysis and trendlines, 277vertical count, 286Point and Figure Method of Anticipating StockPrice Movements (deVilliers), 265Power of Oscillator/Cycle Combinations(Bressert), 374, 375Prechter, Robert, 320, 331, 342Presidential Cycle, 373Price action, and shifts in supply anddemand, 2Price channels, 219-220, 332-334Price filters, 71-72, 122Price forecasting, 393-394Price gaps, 94-97, 402breakaway gaps, 94-95exhaustion gaps, 96-97island reversal pattern, 97Tunaway (measuring) gaps, 95-96types of, 94Price patterns, 57, 100-103, 185continuation, 100-101, 129-156measuring techniques, 101and point and figure charts, 275-277Teversal, 99-128volume, 100as confirmation in, 162-164See also Continuation patterns;Reversal patternsPricing structure, futures, 12Primary cycle, 359Primary trends, 25-26Profit Magic of Stock Transaction Timing(Hurst), 348Program buying, 415Program selling, 415-416Program trading, 414, 415-416Proportionality, principle of, 351, 353Protective stops, 397Pugh, Burton, 362Put/call ratios, 178-179Put open interest, 177
Quantitative analyst, 11
Random Walk Theory, 19-21and buy-and-hold strategy, 16Range development and profile patterns,484-485Range extension, 486-488Index
539
 
Rate of change (ROC), measuring, 234Rectangle formation, 147-151similarities/differences, 151swings within range, trading, 150-151volume pattern, 150Rectangles, 31Relative strength analysis, 422-426, 450-451Relative Strength Index (RSI), 239-245, 374interpreting, 242-245Return line, 80-85measuring implications, 82-85Reversal days, 90-93Reversal candle patterns, 301-304Dark Cloud Cover, 302, 311Evening Star, 303-304, 312Morning Star, 303, 312Piercing Line, 302-303, 311Reversal patterns, 99-128double tops and bottoms, 100, 117-121filters, 122head and shoulders, 100, 103-107complex, 113-115as consolidation pattern, 115failed, 113-115 :inverse, 110-112ideal pattern, variations from, 121-125saucers/spikes, 100, 125-127triple tops and bottoms, 100, 115-117Reward-to-risk ratios, 397-398Rhea, Robert, 24, 319Right angle triangles, 138Rising Three Methods candle pattern, 304-305, 315Ruggiero, Murray, Jr., 428Runaway gaps, 95-96Russell 2000, 422, 435, 449-451Russell, Richard, 24
S&P 500, 14, 32, 415-416, 425, 449-451
Saucers, 125-127
Seasonal cycles, 359, 369-372
Secondary trends, 25, 52-54
Self-fulfilling prophecy, and technicalanalysis, 15-18
Selling climax, 91, 92, 93, 175
Sell limit order, 403-404
Sell stop order, 404
Semilog chart scaling, 188
Sentiment indicators, 15
Separating Lines candle pattern, 31570 line, using to generate signals, 245-246Shooting Star candle pattern, 310Side by Side White Lines candle pattern,316Sideways trend, 50-52Simple moving average, 197, 199Smarter Trading (Kaufman), 222Speedlines, 87-89Spikes, 125-127Spinning Tops, 299-300Standard deviation, 209, 476Starc bands, 469-470Statistical analyst, 11Steidimayer, J. Peter, 411, 475fn, 479-480Stick Sandwich candle pattern, 314Stochastic oscillator, 246-249, 374Stock index futures, 8Stock market analysis, 14-15Stock Market Barometer (Rhea), 24Stock market cycles, 373Stock market indicators, 433-452advance-decline (AD) line, 436AD divergence, 437daily vs. weekly AD lines, 437variations in, 437-438Arms Index (TRIN), 444, 445Open Arms, 446smoothing, 445-446TICK vs., 444CandlePower charting, 448-449Equivolume charting, 447-448McClellan oscillator, 438-439McClellan Summation Index, 439-440market averages, comparing, 435, 449-451market breadth, measuring, 433New High-New Low index, 440-442sample data, 434-435upside vs. downside volume, 443-444See also Advanced technical indicatorsStock Market Timing (Cohen), 277Stocks, 8as economic indicators, 32life span, 12-13margin requirements, 13pricing structure, 12time frame, 14and timing, 14Stock Trader’s Almanac (Hirsch), 373540
Index
 
Stoller, Manning, 469Stop limit order, 404Stop order, 404Summation, principle of, 351-352Support and resistance, 55-65, 401psychology of, 59-61resistance, defined, 55-56reversal of roles, 56-59support, defined, 55and volume, 60Swing measurement, 151-153Symmetrical triangle, 130, 131-135, 331defined, 132measuring technique, 135triangle resolution, time limit for, 133-134volume, 134-135Symmetric distribution, 476Synchronicity, principle of, 351, 353, 354
Technical analysis:applied to time dimensions, 9-10applied to trading mediums, 8chartered market technician (CMT), 456-457coordinating with fundamental analysis,455-456criticisms of, 15-19defined, 1economic forecasting, 10Federal Reserve approval, 459-460flexibility/adaptability of, 7-8flow of funds analysis, 15global reach of, 458International Federation of TechnicalAnalysts (IFTA), 457, 458Market Technicians Association (MTA),457names for, 458-459, 460number three, importance of, 76philosophy of, 1-22history repeats itself, 4-Smarket action discounts everything, 2-3prices move in trends, 3-4and self-fulfilling prophecy, 15-18sentiment indicators, 15in stocks and futures, comparison of, 12-14technical checklist, 454-455
using in timing, 400Technical analysis of Stock trends (Edwardset al.), 33, 448Technical analyst, 10-12Technical forecasting, fundamental fore-casting vs., 5-6Technical tools, 15, 374Technician, 10-12Telescan, 38030 line, using to generate signals, 245-2463% penetration criterion, 71Three Black Crows candle pattern, 3123 box reversal point and figure chart, 277-282chart patterns, 280-282construction of, 278-282measuring techniques, 286trendlines, 282-286Three Inside Down candle pattern, 313Three Inside Up candle pattern, 313Three Line Strike candle pattern, 316Three Outside Down candle pattern, 313Three Outside Up candle pattern, 313Three Stars in the South candle pattern,314Three White Soldiers candle pattern, 312Time cycles, 212, 343-375basic concepts, 348-351and charting techniques, 355-358Classification of, 359combining cycle lengths, 361combining cycles with other technicalTools, 374crests, 348-351cyclic principles, 351-353dominant cycles, 358-360Ehrlich Cycle Finder, 363-366and 4 week rule, 212, 215-216, 362isolating cycles, 363-368January Barometer, 373Kondratieff Wave, 359-360left and right translation, 362-363Maximum Entropy Spectral Analysis(MESA), 374-375and moving averages, 212Presidential Cycle, 365, 373qualities of, 348-351seasonal cycles, 359, 369-372stock market cycles, 373and trend, 361-362Index
541
 
troughs, 348-351Time dimensions, technical analysisapplied To, 9-10Time filter, 71Time Price Opportunity (TPO), 479Time series analysis, 19Timing, 393-394analysis vs., 6-7using technical analysis in, 400Top failure swing, 242-243Top reversal day, 91, 92Tower, Kenneth, 292-294, 296Trader's Library, 375Trader's Notebook, 215TradeStation (Omega Research), 389-390,497-500Trading:elements of, 393-394after periods of success/adversity, 399Trading cycle, 359, 362Trading for a Living (Elder), 442Trading mediums, technical analysisapplied to, 8Trading multiple positions, 398-399Trading orders, types of, 403-405Trading range, 51, 147-150Trading system:building, 493-503concept design, 495-497evaluating results, 500-501money management, 501objective rules, 497testing code, 497-500trading signals, checking on computer,497Trading tactics, 393-394, 400-402applied to stocks, 409and point and figure charts, 286-288timing, using technical analysis in, 400Trend, 49-98classifications of, 52-54definition of, 49downtrend, 50-52fan principle, 74-76Fibonacci fan lines, 90Gann fan lines, 90intermediate trend, 52-54internal trendlines, 90major trend, 52-54monthly reversals, 93
near term trend, 52-54percentage retracements, 85-87price gaps, 94-97reversal days, 90-92sideways trend, 50-52speed resistance lines, 87-89support and resistance, 55-65and time cycles, 361-362trading range, 51trendlines, 65-74uptrend, 50-52weekly reversals, 93See also Price gaps; Support and resis-tance; TrendlinesTrend day, 484-486Trending vs. trading units, 398-399Trendlines, 65-74adjusting, 77-79breaking of, 68, 71-72, 102channel line (return line), 80-85determining significance of, 69down trendline, 65-66drawing, 67how to use, 67-68internal, 90measuring implications of, 72-74and price action, 69price filters, 71-72relative steepness of, 76-80and reversal of roles, 72-73small penetrations, how to handle, 70-71tentative vs. valid, 673 box reversal point and figure chart,282-286up trendline, 65-66Trend trading, 9Triangles, 76, 130-147ascending, 130, 131, 136-138, 331broadening formation, 130, 140-144descending, 130, 138-140, 331and Elliott Wave Theory, 329-331flags, 141-145measured move, 153minimum requirement for, 132pennants, 141-145rectangle formation, 147-151symmetrical, 130, 131-135, 331time factor in, 140wedge formation, 146-147, 148542
Triangles (cont.)See also Ascending triangle; DescendingTriangle; Symmetrical triangleTriple crossover method, 204triple tops and bottoms, 76, 115-117, 164Tri-Star candle pattern, 312, 313Troughs, 348-351time between, 12528 day trading cycle, 362Two Crows candle pattern, 3152 day rule, 71-72Two-thirds retracement, 85-872 week rule, 212
Understanding Fibonacci Numbers (Dobson),342
Unique Three River candle pattern, 314
Upside Gap Three Methods candle pattern,314
Upside Gap Two Crows candle pattern, 314
Upside Tasuki Gap candle pattern, 316
Uptrend, 50-52
UST Securities, 292, 294
Value Area, 487, 488-489Van Nice, Nick, 177Vantage Point software, 430Variation, principle of, 353-355Visual Investor, The, 430, 458Volatility, and Bollinger bands, 211Volume:
on-balance volume (OBV), 165-166
alternatives to, 166-167on bar charts, 41-42as confirmation in price patterns, 163-164
Index
defined, 158degree of penetration, 61-64head and shoulders reversal pattern,100, 107-108interpreting:for all markets, 162-169general rules for, 161-162and price, 163-165and price patterns, 100round numbers as, 64-65as secondary indicator, 158-162and support and resistance, 60Volumes Cycles in the Stock Market (Arms),448V-pattern, 125-127
Wall Street Journal, The, 23-24, 265-266,434, 436Wave Principle, The, 319Wedge formation, 146-147, 148Weekly charts, 35, 45-46, 181-182Weekly price channel (weekly rule), 215-220Weekly reversals, 93, 185Weekly rule, 215-2204 week rule, 212, 219adjustments to, 217-218and cycles, 218-219Wilder, J. Welles, 239, 307, 378, 380, 381-387, 469Wizard Trading, 216Wyckoff, R.D., 265
Zig-zags, 324-326<|end|>