Technical Analysis of Stock Trends

If It Is Definitive, Why Offer a New Edition?......Page 6
Technology......Page 7
Changes and Developments in Technical Analysis......Page 8
The Crystal Ball......Page 9
About Apparent Anachronisms......Page 12
Absolutely Necessary Revisions......Page 13
About Gender in Grammar......Page 14
About Gender in Investors......Page 15
Betwixt and Between, 1/8 of a Dollar or 12.5 Cents......Page 16
The Editorial “I”......Page 17
Acknowledgments......Page 18
In Memoriam......Page 20
Preface to the Seventh Edition......Page 22
Preface to the Fifth Edition......Page 26
Preface to the Fourth Edition......Page 28
Preface to the Second Edition......Page 30
Foreword......Page 32
Contents......Page 34
Technical Theory......Page 42
The Technical Approach to Trading and Investing......Page 44
Definition of Technical Analysis......Page 45
EN: The Elliott Wave Theory: Perspective and Comments......Page 47
Charts......Page 50
Different Types of Scales......Page 51
The Dow Theory......Page 54
The Dow Averages......Page 55
Basic Tenets......Page 56
Tide, Wave, and Ripple......Page 58
Major Trend Phases......Page 59
Principle of Confirmation......Page 60
EN: Modern Market Importance of Dow Theory and Necessity for Moving to a New Composite Market Theory......Page 64
Five Years of Dow Interpretation......Page 66
The First Severe Test......Page 68
Failure to Confirm......Page 69
Signs of Major Turn......Page 72
The Bull Signal......Page 74
The First Correction......Page 75
Bull Trend Reaffirmed......Page 77
The Rails Falter......Page 79
The Spring of 1946......Page 80
Final Up Thrust......Page 82
The Bear Market Signal......Page 84
The Dow Theory Is “Too Late”......Page 86
The Dow Theory Frequently Leaves the Investor in Doubt......Page 88
The Dow Theory Does Not Help the Intermediate Trend Investor......Page 89
The Dow Theory in the 20th and 21st Centuries......Page 90
Important Reversal Patterns......Page 94
Important Reversal Patterns......Page 95
Time Required to Reverse Trend......Page 96
The Head-and-Shoulders......Page 98
Volume Is Important......Page 99
Breaking the Neckline......Page 101
Variations in Head-and-Shoulders Tops......Page 102
Price Action Following Confirmation: The Measuring Formula......Page 104
Relation of Head-and-Shoulders to Dow Theory......Page 107
Head-and-Shoulders (EN: or Kilroy) Bottoms......Page 112
Multiple Head-and-Shoulders Patterns......Page 115
Tendency to Symmetry......Page 116
A Leisurely Pattern......Page 119
Rounding Tops and Bottoms......Page 120
How Rounding Turns Affect Trading Activity......Page 124
The Dormant Bottom Variation......Page 128
Volume Pattern at Tops......Page 129
Important Reversal Patterns - The Triangles......Page 136
Symmetrical Triangles......Page 137
Some Cautions About Symmetrical Triangles......Page 139
How Prices Break Out of a Symmetrical Triangle......Page 140
A Typical Triangle Development......Page 143
Reversal or Consolidation......Page 147
The Right-Angle Triangles......Page 150
A Planned Distribution......Page 153
Descending Triangles......Page 155
Volume Characteristics Same as Symmetrical Type......Page 157
Measuring Implications of Triangles......Page 159
Other Triangular Formations......Page 164
The Rectangles, Double and Triple Tops......Page 166
Pool Operations......Page 168
Relation of Rectangle to Dow Line......Page 171
Rectangles from Right-Angle Triangles......Page 173
Double and Triple Tops and Bottoms......Page 175
Distinguishing Characteristics......Page 177
Double Bottoms......Page 182
Triple Tops and Bottoms......Page 184
The Broadening Formations......Page 188
Volume During Broadening Formations......Page 190
A Typical Example......Page 191
The Orthodox Broadening Top......Page 192
Why No Broadening Bottoms?......Page 195
Right-Angled Broadening Formations......Page 196
The Diamond......Page 197
Wedge Formations......Page 199
The Falling Wedge......Page 204
Wedges on Weekly and Monthly Charts......Page 205
The One-Day Reversal......Page 207
The Selling Climax......Page 209
Spikes......Page 218
Key Reversal Days......Page 219
Consolidation Formations......Page 226
Flags and Pennants......Page 227
The Pennant - A Pointed Flag......Page 231
The Measuring Formula......Page 233
Where They May Be Expected......Page 235
Flag Pictures on Weekly and Monthly Charts......Page 237
Head-and-Shoulders Consolidations......Page 238
Scallops-Repeated Saucers......Page 240
Modern vs. Old-Style Markets......Page 244
Which Gaps Are Significant?......Page 248
Closing the Gap......Page 249
The Common or Area Gap......Page 251
Breakaway Gaps......Page 252
Continuation or Runaway Gaps......Page 256
Two or More Runaway Gaps......Page 259
Exhaustion Gaps......Page 260
The Island Reversal......Page 264
Gaps in the Averages......Page 265
Support and Resistance......Page 268
Normal Trend Development......Page 269
The Explanation......Page 270
Estimating Support-Resistance Potential......Page 273
Locating Precise Levels......Page 276
Significance of Support Failure......Page 279
Popular Misconceptions......Page 280
The Round Figures......Page 282
Repeating Historical Levels......Page 283
Pattern Resistance......Page 284
Support and Resistance in the Averages......Page 288
The Trendline......Page 290
How Trendlines Are Drawn......Page 292
Arithmetic vs. Logarithmic Scale......Page 295
Tests of Authority......Page 296
Validity of Penetration......Page 299
Amendment of Trendlines......Page 301
Double Trendlines and Trend Ranges......Page 303
Trend Channels......Page 305
Consequences of Trendline Penetration - Throwbacks......Page 307
Intermediate Downtrends......Page 310
Corrective Trends - The Fan Principle......Page 312
Major Trendlines......Page 318
Major Downtrends......Page 320
Major Trend Channels......Page 323
EN: Trendlines in the Averages, and Trading in the Averages......Page 324
Trading the Averages in the 21st Century......Page 328
Technical Analysis of Commodity Charts......Page 332
A Summary and Some Concluding Comments......Page 338
Technical Analysis and Technology in the 21st Century: The Computer and the Internet, Tools of the Investment/Information Revolution......Page 344
The Importance of Computer Technology......Page 346
Other Technological Developments of Importance to the Technical Magee Analyst and All Investors......Page 347
The Internet - the Eighth Wonder of the Modern World......Page 348
Marking-to-Market......Page 349
Summary 2......Page 350
Options......Page 352
Quantitative Analysis......Page 354
Futures on Indexes......Page 355
Options on Futures and Indexes......Page 356
The Wonders and Joys of Investment Technology......Page 357
Investment and Hedging Strategies Using the Chicago Board of Trade DJIASM Futures Contract......Page 358
Fungibility......Page 359
Using Stock Index Futures to Control Exposure to the Market......Page 360
Situation 1: Portfolio Protection......Page 362
Situation 2: Increasing Exposure with Futures......Page 363
Situation 3: Using Bond and Index Futures for Asset Allocation......Page 365
Perspective......Page 366
Option Premiums......Page 367
Exercising the Option......Page 368
Profits in Rising Markets......Page 369
Situation 1......Page 370
Situation 2......Page 371
Situation 4......Page 372
Recommended Further Study......Page 373
Midword......Page 374
The Tactical Problem......Page 378
What’s a Speculator, What’s an Investor?......Page 388
The Strategy of the Long-Term Investor......Page 389
Rhythmic Investing......Page 390
Summary......Page 391
The All-Important Details......Page 392
The Simplest and Most Direct Way to Use a Computer for Charting Analysis......Page 394
Summary......Page 395
The Kind of Stocks We Want: The Speculator’s Viewpoint......Page 396
The Kinds of Stocks Long-Term Investors Want......Page 400
Construction of the Index Shares and Similar Instruments......Page 401
An Outline of Instruments Available for Trading and Investing......Page 402
The Importance of These Facilities: Diversification, Dampened Risks, Tax, and, Most Important, Technical Regularity......Page 403
Summary......Page 404
Selection of Stocks to Chart......Page 408
Selection of Stocks to Chart - Continued......Page 412
Choosing and Managing High-Risk Stocks: Tulip Stocks, Internet Sector, and Speculative Frenzies......Page 418
Managing Tulipomanias and Internet Frenzies......Page 419
Detailed Techniques for Management of the Runaway Issues......Page 422
The Probable Moves of Your Stocks......Page 430
Two Touchy Questions......Page 436
Short Selling......Page 438
Round Lots or Odd Lots? (EN: or Put Another Way, Size?)......Page 444
Stop Orders......Page 446
The Progressive Stop......Page 449
What Is a Bottom - What Is a Top?......Page 454
Basing Points......Page 456
Trendlines in Action......Page 460
Buying Stock, “Going Long”......Page 463
Liquidating, or Selling a Long Position......Page 464
Covering Short Sales......Page 467
Additional Suggestions......Page 468
General Outline of Policy for Trading in the Major Trend......Page 469
Use of Support and Resistance......Page 470
Not All in One Basket......Page 476
EN: Diversification and Costs......Page 477
Measuring Implications in Technical Chart Patterns......Page 478
The Dow Theory......Page 482
Head-and-Shoulders Bottom......Page 485
Rounding Tops and Bottoms......Page 486
Right-Angle Triangles......Page 490
Rectangles......Page 492
Right-Angled Broadening Formations......Page 496
One-Day Reversals......Page 500
Flags and Pennants......Page 502
Gaps......Page 505
Support and Resistance......Page 506
Trendlines......Page 508
A Quick Summation of Tactical Methods......Page 512
Effect of Technical Trading on Market Action......Page 516
Automated Trendline: The Moving Average......Page 518
Crossovers and Penetrations......Page 520
“The Same Old Patterns”......Page 524
Not All the Same......Page 533
Balanced and Diversified......Page 582
September 28, 1985: An Oversold Market......Page 587
Trial and Error......Page 590
How Much Capital to Use in Trading......Page 592
Application of Capital in Practice......Page 596
Put and Call Options......Page 599
Portfolio Risk Management......Page 602
Overtrading - and a Paradox......Page 603
Risk of a Portfolio......Page 606
Pragmatic Portfolio Theory (and Practice)......Page 607
Determining the Risk of One Stock......Page 608
Measuring Maximum Drawdown, or Maximum Retracement......Page 609
Portfolio Risk Over Time......Page 610
Summary of Risk and Money Management Procedures......Page 611
Stick to Your Guns......Page 614
The Probable Moves of Your Stocks......Page 616
A Discussion of Composite Leverage......Page 618
Overtrading - and a Paradox......Page 620
Composite Leverage on an Entire Portfolio......Page 622
Negative Composite Leverage......Page 623
Normal Range-for-Price Indexes......Page 624
Sensitivity Indexes of Stocks......Page 626
The Mechanics of Building a Chart......Page 634
Holidays-Ex-Dividend Days......Page 635
When the Chart Goes Off the Paper......Page 636
The Chart Record of Transactions......Page 637
Supplementary Memoranda on the Chart......Page 638
TEKNIPLAT Chart Paper......Page 639
The Time Scale......Page 642
Ex-Dividends and Split-Ups......Page 643
Commodities Futures......Page 644
Observable Patterns......Page 645
Importance of Stop-Loss Orders......Page 646
Trends......Page 647
Moving Averages......Page 649
Time Span......Page 650
Single Moving Average......Page 651
Dual Moving Averages......Page 652
Weighted and Exponential Moving Averages......Page 653
Moving Average Convergence Divergence (MACD)......Page 654
MACD Trendlines, Divergences, and Combinations......Page 656
Customizing......Page 657
Bollinger Bands with Other Indicators......Page 658
%D Line and %K Line......Page 659
Divergence......Page 660
The 0% and 100% Misunderstandings......Page 661
Check the Weekly/Monthly......Page 662
Volume and Open Interest......Page 663
Money Flow......Page 664
New Money......Page 665
Divergence......Page 667
Time Periods......Page 668
Relative Strength Formula......Page 669
Important Concepts in Commodities/Derivatives Trading......Page 670
Important and Indispensable Sites......Page 674
Section 3......Page 675
The Sharpe Ratio......Page 677
Calculating Volatility......Page 678
Section 6......Page 680
The Elliott Wave Theory: Perspective and Comments......Page 682
Part One......Page 684
Part Two......Page 695
Text Diagrams......Page 700
Glossary......Page 702
Index......Page 732