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• Combining Statistical and Pattern Analysis by Walter T. Downs

  ARTICLE SYNOPSIS ...Patterns are one of the oldest forms of technical analysis. Yet, because patterns can often be subjective, few of us take the time to combine statistical information with this type of market analysis. Mathematical definition and detailed statistical analysis allow us to test patterns, giving us a unique view of one particular stage of a market. We refer to the quantified use and study of repetitive price formations as advanced pattern recognition theory (APRT). Let us discuss some key factors found in APRT patterns and then analyze an example of a pattern we have found. KEY PATTERN TRAITS Pa...

AUTHOR: Walter T. Downs, Ph.D.DATE: OCT1998SUBJECT: Trading Techniques

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• Cup-with-Handle and the Computerized Approach by Rick Martinelli and Barry Hyman

  ARTICLE SYNOPSIS ...The cup-with-handle is a chart pattern that identifies stocks preparing for uptrends. Here are the steps to convert this pattern to a set of rules for screening your stock database to identify likely candidates. The CANSLIM approach to investing combines technical and fundamental analysis to identify some of the promising stocks in a cycle. According to the system, only those stocks meeting a set of quantifiable criteria are candidates for purchase. In addition, a stock must exhibit one of three or four different chart patterns that summarize less quantifiable aspects of the system. Manually...

AUTHOR: Rick Martinelli and Barry HymanDATE: OCT1998SUBJECT: Classic Techniques

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• Flexible Market Forecast by Michael Kahn

  ARTICLE SYNOPSIS ...It is important to be flexible in your market forecasts, as this walk through some recent trends in various markets indicate. That repetitive price patterns exist is one of the foundations of technical analysis. The reasoning is that repetitive patterns occur because traders react to similar market conditions in a similar fashion. Unfortunately, in the real world, the term similar market conditions is subject to interpretation, as the market's price movements do not unfold in a precise, repetitive fashion. Take a look at ex-amples of some market movements, including trends and reversals, to ...

AUTHOR: Michael KahnDATE: OCT1998SUBJECT: Real World

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• Is Gold Still a Barometer by Alex Saitta

  ARTICLE SYNOPSIS ...Is the gold market still an indicator of other trends? Here's a look at the past relationships of gold to the dollar, the Consumer Price Index and the CRB. Analysts often cite intermarket relationships when touting a market's prospects. An analyst might point out that utility stocks have reached a new high, and since they lead interest rate instruments, the fixed-income market would follow. Or an analyst might observe that copper is down, and since copper is a key price component for inflation indices, lower copper prices is bullish for bonds. When you examine the historical data and compare...

AUTHOR: Alex SaittaDATE: OCT1998SUBJECT: Intermarket Analysis

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• Long-Term Fibonacci Support and Resistance by Kevin W. Murphy

  ARTICLE SYNOPSIS ...Here's a historical review of the major swings in the stock market and the Fibonacci relationships. According to long-term FibonacciÝ support and resistance levels in the Dow Jones Industrial Average (DJIA), we are approaching a notable resistance level in the stock market. Many books have been written on the Fibonacci sequence and its many mathematical relationships; this article will not delve into those in any great detail. For those who are unfamiliar with the Fibonacci sequence, however, I will briefly discuss its basis and a few of its mathematical relationships and how they are releva...

AUTHOR: Kevin W. MurphyDATE: OCT1998SUBJECT: Classic Techniques

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• The Next Discount Rate Change by Steven M. Morris

  ARTICLE SYNOPSIS ...Here's a review of the changes in the discount rate, and the implications for investors. The Federal Reserve Act of 1913, modified by the banking acts of 1933 and 1935, created the Federal Reserve System, the central bank of the United States. The responsibilities of the Fed, as it is commonly known, falls into four categories. The Fed supervises and regulates the banks to ensure the safety and financial soundness of the country's banking system. It maintains the stability of the financial system and contains any systematic risk that may arise in the financial markets. It provides financial ...

AUTHOR: Steven M. MorrisDATE: OCT1998SUBJECT: Basic Techniques

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• The Power of Knowledge: James O'Shaughessy by Thom Hartle

  ARTICLE SYNOPSIS ...Money manager and author James O'Shaughnessy is best known for the astute research presented in his books. We spoke to him about what the individual investor should focus on. So how did you start out, anyway? I started out like everyone else, wanting to know why a stock went up or down. I would watch with surprise when the price of story stocks, where the prospects for the company was the best thing since sliced bread, would tumble, despite the glowing recommendations for it. At the same time, I would see stodgy, old-line industrial companies such as Goodyear Tire rallying several hundred pe...

AUTHOR: Thom HartleDATE: OCT1998SUBJECT: Interview

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• Traders' Tips

  ARTICLE SYNOPSIS ...METASTOCK In MetaStock for Windows, you can use the Expert Advisor to recreate the SHARK-32 signals on your charts as discussed in Walter Downs's article in this issue, "Combining statisti-cal and pattern analysis." First, choose Expert Advisor from the Tools menu in MetaStock 6.5. Next, choose New and enter the following formulas: Name: Click the Name tab and enter "Shark-32" in the name field. Trends: Click the Trends tab and enter the following formu-las in the bullish and bearish fields. Bullish: Mov(C,5,S)>Mov(C,20,S); Bearish: Mov(C,5,S)<Mov(C,20,S); Highlights: Click the Hig...

AUTHOR: Technical Analysis, Inc.DATE: OCT1998SUBJECT: Traders' Tips

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• Uncovering Value in an Oversold Stock by Tamalyn V. Crutchfield

  ARTICLE SYNOPSIS ...This trader walks us through one of her trades, detailing the indicators she used and the decisions she made. The age-old philosophies of "Buy, low, sell high" and "Buy cheap, sell rich" are the investing approaches every investor strives toward. Unfortunately, the task of uncovering qualified stocks is not as easy as the four-word philosophies imply. By qualified, I refer to an undervalued stock that is technically and fundamentally sound enough to appreciate in price. The challenge is not just limited to finding undervalued stocks; it is to identify those stocks that have exhausted their d...

AUTHOR: Tamalyn V. CrutchfieldDATE: OCT1998SUBJECT: Real World

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• V16:10: Letters

  ARTICLE SYNOPSIS ...NOTE FROM UKRAINE Editor, I am deeply impressed by the high quality of your journal. It was a great pleasure to read articles in different areas of technical analysis. VLADIMIR KHRAPKO Dept. of economics and management Simferopol State University, Simferopol, Crimea, Ukraine DAYTRADING STOCKS Editor, A few months back, I wrote you requesting articles on daytrading the financial markets. In the August 1998 issue, an article by Mark Conway, "Daytrading stocks," was published dealing with the new techniques of daytrading. Well, I'd like to congratulate you on such an informative and exce...

AUTHOR: Technical Analysis, Inc.DATE: OCT1998SUBJECT: Letters To S&C