Chapter 8 Long term charts

Some points Long term charts are weekly and monthly charts. Long range price charts provide a perspective on the market trend that is impossible to achieve with the use of daily charts alone. Double tops and bottoms, head and shoulder reversals, and triangles are usually seen in long term charts.(所以稱 Primary Reversal) Weekly and monthly reversals are frequently seen. (所以稱 Primary Reversal) Weekly reversal patterns are the equivalent of the key reversal day on the daily charts. Long rang charts need not be adjusted for inflation. The markets themselves have already made the necessary adjustments.

Gold and Dow industry

*The order of using charts *The proper order to follow in chart analysis is to begin with the long range and gradually work on the near term. The first chart to be considered is the 20 year monthly chart, then consults the most recent 5 years on weekly chart, and then narrow your focus to the 6 to 9 months daily bar chart. ** Long term charts are useful in the analytical process to help determine the major trend and price objectives. They are not suitable, however, for the timing or entry and exit points, For that more sensitive task, daily and intraday charts should be utilized.

Examples *The drawings on long term charts are limited to support and resistance levels, trendlines, percentage retracements, weekly reversal, and an occasional price pattern. Price patterns mean頭肩頂等patterns. My note: Price patterns are usually made on daily basis. [Tactic] *Signals on weekly charts act as filters for short term (daily) timing decision. Semilog chart scaling becomes valuable when studying long range price trends. Figures 8.2-12

Support and percentage retracement in long term charts Figure 8-2 This chart of semiconductor stocks shows the valuable perspective of a weekly chart. The late 1997 price fall stopped right at the 62% retracement level and bounced off chart support formed the previous spring (see circle)

Draw a trendline in a long term chart Figure 8-3 The early 1998 bottom in General Motors began right at the trendline drawn along the 1995-1996 lows. That’s why it’s a good idea to track weekly chart

Support in a long term chart Figure 8-4 This monthly chart shows the 1997 rally in Burlington Resources stopping right at the same level that stopped the 1989 and 1993 rallies. The 1995 bottom was at the same level as the 1991 bottom. Who says charts don’t have a memory?

Resistance in a long term chart Figure 8-5 An investor in Inco Ltd. During the 1997 rally could have benefited from the knowledge that the 1989, 1991, and 1995 tops occurred right at 38.

Resistance and break through in a long term chart Figure 8-6 Do long term charts matter? The 1993 bottom in IBM was at the same level as the bottom formed 20 years earlier in 1974. The break of an 8 year down trendline (see box) in 1995 confirmed the new major uptrend.

Resistance in a long term chart Figure 8-7 Helmerich & Payne finally broke out above 19 in 1996 after failing in 1987, 1990, and 1993. The late 1996 pullback at 28 occurred near the 1980 peak.

Figure 8-8 This monthly chart of Dow Jones shows a head and shoulders bottom forming for 10 years from 1988 to 1997. The right shoulder also has the shape of a bullish ascending triangle. The breakout over the neckline at 42 completed the bottom.

Figure 8-9 A bullish symmetrical triangle was easy to spot on the monthly chart of Southwest Airlines. But you probably wouldn’t have spotted it on a daily chart.

Figure 8-10 The 1994 bottom in the Down Utilities bounced off a trenline lasting 20 years. There are those who claim that past price action has no bearing on the future. If you still believe that, go back and look at these long term charts again.

Figure 8-11 On this linear-scaled chart of the Japanese stock market, the long term up trendline (line 1) drawn under the 1982 and 1984 lows was broken in early 1992 (see circle) near 22,000. That was two years after the actual peak.

Figure 8-12 The same Japanese chart from Figure 8 Figure 8-12 The same Japanese chart from Figure 8.11 using log scalling. Line 1 is the trendline from the previous figure. The steeper line 2 was broken in mid-1990 (see box) at 30,000. Up trendline on log charts are broken sooner than linear up trendlines.

Compare Figures 8-11 and 8-12