Sections Of Market Campaigns
All market campaigns, up or down, move in 3 to 4 sections. When an advance starts, the market runs for several weeks or several months and then halts for several weeks or months, moving up and down over a range of 10¢ to 20¢ or more according to the price of the option, then the advance is resumed and the price crosses the high level of the first section, moves higher, halts again, and reacts for a period of time; then crosses the top of the second section and moves up again for another period of time and halts for the third time, which is a very important point to watch as markets often culminate at the end of the third section and a greater decline follows.
Most markets run out in 3 important sections or campaigns. However, after resting and reacting, if the price crosses the third top, it will then move up to the top of the fourth section. This fourth advance may be a shorter period of time than the previous section, or, in some cases, may consume a greater period of time, especially if the option is very active and high‑priced. This fourth top is very important and generally marks a culmination and a reversal for a greater decline.
Reverse this rule in a bear market. Watch the action of the market when it makes the third and fourth decline. But, remember, in a bear market, when rallies come, they may make only one section or one move, or, in extreme cases, only make the second section, then reverse and follow the main trend down.
You will find it very helpful to study and watch these various sections of a campaign and, by applying the angles from tops and bottoms; you can detect the first minor and major changes in trend.
Strength Or Weakness Denoted By Position On Angles
All angles on the monthly and weekly charts are of greater importance than those on the daily chart because the daily trend can change quite often, while only the major changes are shown according to the angles on the monthly and weekly charts.
Always consider the distance an option is from its beginning price when it breaks any important angle or crosses any important angle. The further away from the beginning price, the more important the change in trend, whether this is crossing angles from the top or breaking under an angle from the bottom.
When An Option Is In The Weakest Position
An option is in the weakest position when it has completed distribution and broken under a 45° angle from an important bottom on the weekly or monthly chart. It is also in the weakest position when it has broken under the ½-point between any important top or bottom. The longer the time period has run and the higher the price, the weaker the position. Example: (Refer to 2-day and weekly charts on May Beans, 1947-1948.)
If an option has advanced to 150 and has only moved down 25¢ when the 45° angle from an extreme low on a weekly or monthly chart is broken, then it is in a very weak position because it is so far above the ½-point on its price movement, already having squared out the time period with price.
Weakness in price develops when it breaks the ¾-point, the ⅔-point, the ½-point, etc., but the position on the timing angles from the bottom tells you still more about the weak position.
An option shows its first weakness when it breaks the first important angle coming up from the last bottom in the final run in a bull market.
When An Option Is In The Strongest Position
An option is always in the strongest position coining up from a bottom when it is holding above the very acute angles on the daily, weekly or monthly charts, especially on monthly and weekly charts.
As long as the option holds above the angle of 2x1 (a gain of 2¢ per day) on the daily chart, it is in a very strong position, as far as the bottom is concerned. In fact, it is always in a strong position on the daily as long as it holds above the 45° angle. The same applies to weekly and monthly charts, which are the most important trend indicators.
I have found that the Grains, which have the greatest advances, are those that always hold above the angle of 2x1 on the monthly chart, or gain 2¢ per month for a long period of time. I have seen prices rest 10 to 15 times on the angle of 2x1 and never break it until they have advanced 100¢ or more. In this way, the price stays ahead of time and stays within the square of time by being far above the angle of 45¢, and therefore is in a very strong position. But, the time must come when the cycle has run out and the main trend begins to change from a bull market to a bear market -‑ when the breaking of the angle from the last bottom shows a change in trend.
Another indication that an option is in a strong position is when it advances and moves up above the ½-point of the previous price movement, and then holds the ½-point, that is, advances above it and then reacts and fails to break under. This is just the same as resting on a 45° angle and indicates a very strong position.
The safest buying point is when the price rests on a 45° angle, placing a STOP-LOSS order below it.
Another point to buy is on the ½-point of the price movement, placing a STOP-LOSS order under the ½-point.
When the main trend is up, it is also safe to buy, when the option reacts to the angle of 2x1 (a gain of 2¢ per time period) on the weekly or monthly chart.
Regaining Angles Or Crossing Lines
Remember, when any option breaks under the 45° angle from the extreme low price of a move on the daily, weekly or monthly chart, it is then in a very weak position and indicates a decline to the next angle. However, when an option can regain the 45° angle, it is in a stronger position.
When Grain Is In A Strong Position From Bottom
and In A Weak Position From Top
An option is in a strong position from the bottom when it is keeping above the angle of 45°, or the angle of 2x1, but at the same time it can be in a weak position when it rallies up and strikes against a 45° angle, or the angle of 2x1 coming down from the top, then it is a short sale until it can cross these angles or cross previous tops. When it breaks the angles from the bottom, it is in a weak position and indicates lower.
An option can be in a strong position from the top and in a weak position from the bottom, that is, it may cross some important angles from the top after a long period of time, but at the same time may break under the 2x1 angle or 45° angle from the bottom, which would indicate that it is in a weak position and getting ready to go lower.
When Angles From Extreme Top Are Crossed
The 45° angle, drawn from the extreme high price of an option, is most important and when it is crossed, a major move may be expected.
Quick Calculation Of Angles
It is not necessary to draw these angles from a price a long way back. You can make the calculations and determine where they cross. Example: Suppose, in January 1951, you wish to get the 45° angle from June 1930, when Soy Beans were high at 216. This will make 247 months to January, 1951, and the 45° angle, moving up from zero, will be at the price of 247; therefore, you start the 45° at 247 and move it up 1¢ per month until the price declines below it.
1920, February 15, Soy Beans, high 405. This was the highest in history until 1947. To get the angle and time period to February 15, 1951, will be 31 years or 372 months and the 45° angle moving up from 0 will cross at 372. The 45° angle moving down from 405 will cross at 33. February, 1953, will be 396 months from 1920, and November 14, 1953, will be 405 months, which equals the highest price; and the 45° angle moving down from the top will reach 0. Time and price will have squared out on the monthly chart, making November 1953, a very important period for a change in trend.
Latitude And Longitude
On all charts - daily, weekly or monthly - the price must move up or down on the vertical angles. Therefore, the price movement is the same as latitude. You should begin with 0 on any chart - daily, weekly or monthly - and draw the important angles and resistance levels across, which measures latitude.
Next, number the time points in days, weeks or months across and draw the horizontal angle at each important natural angle, such as 11¼, 22½, 33¾, 45, 56¼, 67½, 78¾, 90, 101¼, 112½, 120, etc. Then, you will know when price reaches these important angles and meets resistance.
Longitude measures the time running across the chart, as it moves over each day, week or month. Therefore, you must keep your chart numbered from each important top and bottom in order to get the time measurements, according to angles. These important angles, such as 11¼, 22½, 33¾, 45, 56¼, 60, 78¾, 90, etc., from each bottom and top will show you where the strongest resistance in price and time takes place. These angles prove the parallel or crossing point. Study past records and see what has happened when prices on monthly charts reached these important angles or time periods.
Example: 90-points up in price from 0, draw an angle horizontally across the chart. Then, 90-days, weeks or months, going to the right across the chart, draw a vertical angle up which will cross the horizontal angle at 90 and prove the square. By keeping all these angles up and understanding them on your charts, you will know when important time cycles are running out.
If the price of an option at 60 comes out on the 60th day, week or month, it will meet strong resistance because it has reached the square of price with time. It is at the same latitude or price, and the same longitude or time period. You can always put the square of 90 on a chart, either daily, weekly or monthly, and use the natural angles, but I advise only using this on the weekly and monthly. You can begin this square of 90 from any bottom or top, that is, going up 90-points or from the natural points which are 90, 135 and 180, but you must not fail to square the extreme low and high price, as well as the second and third lower tops and higher bottoms with time.