| AUG 1988
Holt-Winter Channel: taking the formula one step beyond by Ichu Cheng
Holt-Winter Channel: taking the formula one step beyond by Ichu Cheng October 19,1987 witnessed the biggest one-day drop in stock prices in history. The Dow Jones Industrial Average (DJIA) fell 616 points or 26% in a single day. The drop caught most investors by surprise. Are there any indicators that could have warned us about the impending crash? In Figure 1, two parallel lines run along the DJIA line and form a channel which I have developed and have called the Holt-Winter Channel. A week before the crash, the DJIA price lines crossed the lower parallel line. This is the sell signal for the Holt-Winter Channel and it provided a timely signal for unloading portfolios. The Holt-Winter Channel did not signal the severity of the drop, however, because unlike the Holt-Winter formula on which it is based, the channel is not intended to forecast future stock prices. The channel is used as a timing device for getting in and out of a security. Notice that in November 1986, the channel correctly signaled the major market movement of early 1987. A month before the crash on October 19,1987, it signaled a weakening in the market. A week before the crash, it gave a sell signal.
by Ichu Cheng
Technical Analysis of STOCKS & COMMODITIES
The Traders’ Magazine since 1982
has had over 1,226,237 subscribers from 174 different countries.
37,000 Page Traders’ Archive for $89.99
To continue reading, sign-up for trial access to Traders.com and the S&C Archive — 37,000 pages of trading ideas!
After verifying your email address, you will have limited access to the S&C Archive, as well as access to a Digital Edition of S&C, and access to Traders.com Advantage and Working Money for 30 days.
Not a subscriber to Technical Analysis of
STOCKS & COMMODITIES magazine?
Click
here to subscribe, or request
a trial subscription.
Log-in now to view articles from the S&C Archive.
Your Subscriber ID is located at the top of your magazine label, highlighted here in red.
Your last name can be found on the second line, highlighted here in blue.
*If you have a company name on the label, that can also be used. It will appear below your name on the label.
If you do not have a Subscriber ID on your label, you can find it on your statement or renewal form.
For help locating your Subscriber ID number, please call us at 1-800-832-4642 or send an email to Survey@Traders.com. If sending an email, please include your name and mailing address.