Predict Market Swings With Technical Analysis

217 Pages·2003·1.23 MB·English

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PREDICT MARKET
SWINGS WITH
TECHNICAL ANALYSIS
Michael McDonald
John Wiley & Sons, Inc.

PREDICT MARKET
SWINGS WITH
TECHNICAL ANALYSIS
Michael McDonald
John Wiley & Sons, Inc.
Copyright © 2002 by Michael McDonald. All rights reserved.
Published by John Wiley & Sons, Inc., New York.
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To my good friend and mentor,
the late George O’Brien

Contents
INTRODUCTION 1
CHAPTER 1: TRADING PRICE SWINGS 10
CHAPTER 2: A NEW STOCK MARKET MODEL 27
CHAPTER 3: FAIR VALUE: THE THEORY
OF STACKING THE MONEY 48
CHAPTER 4: TECHNICAL ANALYSIS
AND UNSTABLE MARKETS 76
CHAPTER 5: OF BABES, O’BUCS, AND CONTRARY
OPINION 98
CHAPTER 6: PRICE PATTERNS, FRACTALS,
AND MR. ELLIOTT 124
CHAPTER 7: TRADING RANGE MARKETS 150
CHAPTER 8: TRADING RANGE INVESTMENT
STRATEGIES 165
INDEX 205
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Introduction
THE BEGINNING
Adults often view their lives as somehow planned beforehand. What
originally seemed to be unrelated life decisions, like pieces of a jigsaw
puzzle, all came together to form a coherent story. My life seems that
way to me now.
My first passion was the study of mathematics and physics. From the
age of 14, at every Christmas, my parents bought me advanced books on
these subjects. From these, I taught myself calculus and Einstein’s rela-
tivity theories by the age of 15. From this I learned a valuable lesson
while relatively young: I found that if I applied myself, I could master
complicated subjects on my own.
The first time I became curious about stock investing came while I
followed another passion—sports—as a teenager. Back in the early
1960s, the Los Angeles Times didn’t have a separate section for business;
investing and business information occupied the back pages of the sports
section. As a teenager I read the sports pages every day.
Because of the newspaper’s format, it was inevitable that I would
turn the last page on sports and come face to face with business pages
containing nothing but numbers. Although I had no interest in investing
at the time and didn’t understand what the numbers represented, I do
remember thinking that some day I would have to study this. If making
money was simply predicting what these numbers would be, I could
learn how to do it. It would take 10 years before I put that optimistic
thought to the test.
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