Technical Analysis of Stock Trends PDF
Preview Technical Analysis of Stock Trends
TECHNICAL ANALYSIS of STOCK TRENDS TENTH EDITION Robert D. Edwards · John Magee W.H.C. Bassetti Dow-Jones , The Dow , Dow-Jones Industrial Average , and DJIA are service marks of Dow-Jones & Company, Inc., and have been licensed for use for certain purposes by the Board of Trade of the City of Chicago (CBOT®). The CBOT’s futures and future options contracts based on the Dow-Jones Industrial Average are not sponsored, endorsed, sold, or promoted by Dow-Jones , and Dow-Jones makes no representation regarding the advisability of trading in such products. CRC Press Taylor & Francis Group 6000 Broken Sound Parkway NW, Suite 300 Boca Raton, FL 33487-2742 © 2012 by Taylor & Francis Group, LLC CRC Press is an imprint of Taylor & Francis Group, an Informa business No claim to original U.S. Government works Version Date: 20130128 International Standard Book Number-13: 978-1-4665-8916-2 (eBook - Kindle) This book contains information obtained from authentic and highly regarded sources. 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Visit the Taylor & Francis Web site at http://www.taylorandfrancis.com and the CRC Press Web site at http://www.crcpress.com Contents Preface to the tenth edition Preface to the ninth edition Preface to the eighth edition In memoriam Preface to the seventh edition Preface to the fifth edition Preface to the fourth edition Preface to the second edition Foreword Section I: Technical theory Chapter 1 The technical approach to trading and investing Definition of technical analysis Chapter 2 Charts Different types of scales Chapter 3 The Dow Theory The Dow Averages Basic tenets Tide, wave, and ripple Major trend phases Principle of confirmation Chapter 4 The Dow Theory’s defects The Dow Theory is too late The Dow Theory is not infallible The Dow Theory frequently leaves the investor in doubt The Dow Theory does not help the Intermediate Trend investor The Dow Theory in the 20th and 21st centuries Chapter 5 Replacing Dow Theory with John Magee’s Basing Points Procedure The fractal nature of the market Chapter 6 Important Reversal Patterns Important Reversal Patterns Time required to reverse a trend The Head and Shoulders Volume is important Breaking the neckline Variations in Head-and-Shoulders Tops Price action following confirmation: the measuring formula Relation of Head and Shoulders to Dow Theory Chapter 7 Important Reversal Patterns: continued Head-and-Shoulders (EN: or Kilroy) Bottoms Multiple Head-and-Shoulders Patterns Tendency to symmetry A leisurely pattern Rounding Tops and Bottoms How Rounding Turns affect trading activity The Dormant Bottom variation Volume pattern at Tops Chapter 8 Important Reversal Patterns: the Triangles Symmetrical Triangles Some cautions about Symmetrical Triangles How prices break out of a Symmetrical Triangle A typical Triangle development Reversal or Consolidation The Right-Angle Triangles A planned distribution Descending Triangles Volume characteristics same as the Symmetrical type Measuring implications of Triangles Triangles on weekly and monthly charts Other Triangular formations Chapter 9 Important Reversal Patterns: continued The Rectangles, Double and Triple Tops Pool operations Relation of rectangle to Dow Line Rectangles from Right-Angle Triangles Double and Triple Tops and Bottoms Distinguishing characteristics Double Bottoms Triple Tops and Bottoms Chapter 10 Other Reversal phenomena The Broadening Formations Volume during Broadening Formations A typical example The Orthodox Broadening Top Why no Broadening Bottoms? Right-Angled Broadening Formations The Diamond Wedge Formations The Falling Wedge Wedges on weekly and monthly charts Rising Wedges common in Bear Market Rallies The One-Day Reversal The Selling Climax Short-term phenomena of potential importance Spikes Runaway Days Key Reversal Days Chapter 11 Consolidation Formations Flags and Pennants The Pennant: a pointed Flag The measuring formula Reliability of Flags and Pennants Where they may be expected Flag pictures on weekly and monthly charts Rectangular Consolidations: an early phase phenomenon Head-and-Shoulders Consolidations Scallops: repeated Saucers Modern versus old-style markets Chapter 12 Gaps Which gaps are significant? Closing the gap Ex-dividend gaps The common or area gap Breakaway gaps Continuation or runaway gaps and the measuring rule Two or more runaway gaps Exhaustion gaps The Island Reversal Gaps in the Averages Chapter 13 Support and Resistance Normal trend development The explanation Estimating Support–Resistance potential Locating precise levels Significance of Support failure Popular misconceptions The round figures Repeating historical levels Pattern Resistance Volume on breaks through Support Support and Resistance in the Averages Chapter 14 Trendlines and Channels The Trendline How Trendlines are drawn Arithmetic versus logarithmic scale Tests of authority Validity of penetration Amendment of Trendlines Double Trendlines and trend ranges Trend Channels Experimental Lines Consequences of Trendline penetration: Throwbacks Intermediate Downtrends Corrective trends: the Fan Principle Chapter 15 Major Trendlines Major Downtrends Major Trend Channels Trendlines in the Averages Trading the Averages in the 21st century Chapter 16 Technical analysis of commodity charts Technical analysis of commodity charts, part 2: A 21st-century perspective Rocket scientists Turtles? The application of Edwards and Magee’s methods to 21st-century futures markets Stops A variety of methods Everything you need to know as a chart analyst trading futures The return of the great markets of the 1970s Chapter 17 A summary and concluding comments Technical analysis and technology in the 21st century: the computer and the Internet: tools of the investment/information revolution The importance of computer technology Summary 1 Other technological developments of importance to the technical Magee analyst and all investors The Internet: the eighth wonder of the modern world (EN9: Appendix B, Resources, for the ninth edition has been enormously expanded and is of paramount importance to modern investors.) Marking-to-market Separating the wheat from the chaff Chaff Summary 2 Advancements in investment technology, part 1: Developments in finance theory and practice Options Quantitative analysis Options pricing models and their importance Futures on indexes Options on futures and indexes Modern Portfolio Theory The wonders and joys of investment technology Advancements in investment technology, part 2: futures and options on futures on the Dow– Jones Industrial Index at the CBOT Investment and hedging strategies using the CBOT® DJIASM futures contract Settlement of futures contracts Marking-to-market Fungibility Differences between cash and futures Dow Index futures Using stock index futures to control exposure to the market Investment uses of Dow Index futures Situation 1: Portfolio protection Situation 2: Increasing exposure with futures Situation 3: Using bond and index futures for asset allocation Perspective Options on Dow Index futures Option premiums Volatility Exercising the option Using futures options to participate in market movements Profits in rising markets Exploiting market reversals Using puts to protect profits in an appreciated portfolio Situation 1 Improving portfolio yields Situation 2 Using option spreads in high- or low-volatility markets Situation 3 Situation 4 Perspective Recommended further study Section II: Trading tactics Midword Chapter 18 The tactical problem Strategy and tactics for the long-term investor. What’s a speculator, what’s an investor? One definition of the long-term investor The strategy of the long-term investor Rhythmic investing Summary Chapter 19: The all-important details The simplest and most direct way to use a computer for charting analysis Summary Chapter 20 The kind of stocks we want: the speculator’s viewpoint The kind of stocks we want: the long-term investor’s viewpoint Changing opinions about conservative investing The kinds of stocks long-term investors want: The long-term investor’s viewpoint Construction of the Index Shares and similar instruments An outline of instruments available for trading and investing The importance of these instruments: diversification, dampened risks, tax, and, most important, technical regularity Summary Chapter 21 Selection of stocks to chart Chapter 22 Selection of stocks to chart: continued Chapter 23 Choosing and managing high-risk stocks: tulip stocks, Internet sector, and speculative frenzies Managing tulipomanias and Internet frenzies Detailed techniques for management of the runaway issues Hope springs eternal and there is one born every second Chapter 24 The probable moves of your stocks Chapter 25 Two touchy questions The use of margin Short selling Chapter 26 Round lots or odd lots? Chapter 27 Stop orders The progressive stop Stop systems and methods A brief survey of stop methods
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