Article Archive For
SEP1989
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Channel breakout by Peter Aan
ARTICLE SYNOPSIS ...Channel breakout
by Peter Aan
Rules and Formulas: Channel systems use the highest and lowest prices in a series. Many possible
trading variations can be employed and the one I tested involves finding the highest high and lowest low
for the most recent n days. For instance, if you are using an 8-day channel you will examine the highs and
lows for the most recent eight trading days to find the highest high and the lowest low, which are the
reversal points. Buy/sell signals for an 8-day channel reversal are shown in Figure 1.
This test entailed two separate computer runs . One required the mark...
AUTHOR: Peter AanDATE: SEP1989
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Computer spread analysis by Jim Summers, Ph.D.
ARTICLE SYNOPSIS ...Computer spread analysis
by Jim Summers, Ph.D.
Many traders shy away from spread trading owing to the extra difficulties of calculating the spread
and the analysis of the spread in both its legs. Data and software now available for IBM-PCs and clones
can automate this analysis to a considerable degree.
To analyze spreads I use Lotus 1-2-3, a charting program such as MetaStock Professional or Market
Maker, System Writer Plus and contract-specific data from Technical Tools.
One excellent source of information on the subject of spreads is the series of articles by Frank Taucher in
Stocks & Com...
AUTHOR: Jim Summers, Ph.D.DATE: SEP1989
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Demand Oscillator momentum by Thomas Aspray
ARTICLE SYNOPSIS ...Demand Oscillator momentum
by Thomas Aspray
The Demand Index developed by James Sibbett and its counterpart, the Demand Oscillator, are quite
useful in identifying accumulation or distribution in both stocks and commodities. (See ""Fine-tuning the
Demand Index,"" Stocks & Commodities, June 1986.)
The Demand Index is a combination of price and volume, calculated as buying pressure (BP) and selling
pressure (SP). I feel the Demand Oscillator makes signals from the Demand Index easier to interpret and
identifies false index signals. To plot the Demand Oscillator, first calculate Buying Pressure...
AUTHOR: Thomas AsprayDATE: SEP1989
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Leading indicators with momentum by John Ehlers
ARTICLE SYNOPSIS ...Leading indicators with momentum
by John Ehlers
Newcomers to technical trading are often confused by terminology. Oscillators don't oscillate and
stochastics have nothing to do with random variables. Neither does momentum describe the force
required to bring a moving body to rest. In the simplest case, momentum is just the difference between
two time-related variables. I have found that, when combined with moving averages, momentum can
produce some useful indicators.
Because momentum measures the difference of two elements in time, we can consider it a measure of the
rate of change. More spe...
AUTHOR: John F. EhlersDATE: SEP1989
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Letters To S&C
ARTICLE SYNOPSIS ...LETTERS TO S&C
Suggestions for topics
Editor,
In your March 1989 issue you have an article by Steve Notis called ""Testing breakout systems."" It's
described as an S&P 500 system. My question is, will it work with bonds, gold, silver, etc? If it will, but
with slightly different parameters, would you write about it in an upcoming issue? If possible could you
also write about trading thrusts in general: Are there times a thrust will be a reasonably safe trade, how to
tell if it's going to be a failure, volume patterns to look for, etc.
One more thing I would like to see is more in-depth rep...
AUTHOR: Technical Analysis, Inc.DATE: SEP1989
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Mutual fund point & figure by Charles Idol
ARTICLE SYNOPSIS ...Mutual fund point & figure
by Charles Idol
The idea of applying point and figure (P&F) chart analysis to mutual funds causes some conceptual
distress to P&F purists. P&F has no theory, but the basic concept says that the chart patterns are caused
by the effect of supply and demand on the price of an equity. When you speak of mutual funds, you deal
in a conglomeration of equities and, to make things worse, a conglomeration that changes as the fund
manager adjusts the composition of the portfolio.
""So, you see,"" say the purists, ""you don't even know what stocks you are dealing with from day...
AUTHOR: Charles IdolDATE: SEP1989
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Price pattern studies Part 1 by Toby Crabel
ARTICLE SYNOPSIS ...Price pattern studies
Part 1
by Toby Crabel
Do prices tend to move consistently in one direction from open to close, given the previous day's price
pattern, and do these patterns of intraday bias lend themselves to profitable trading systems?
To answer these questions, I have tested all possible two-, three-, four- and five-day open-to-close
patterns for the T-bond futures market from 1978 to 1987. My intention is to provide objective statistical
data that can be used as a reference in trading.
The price patterns in Figure 1 are referred to as
""systems"" because the custom software I used...
AUTHOR: Toby CrabelDATE: SEP1989
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Ratio accumulators by William Mason
ARTICLE SYNOPSIS ...Ratio accumulators
by William Mason
Have you ever noticed how strong market moves are reported in terms of ratios? ""It was a 3-to-1 up
day on advance to decline"" or ""It was a 10-to-1 down day on volume."" Ratios inherently give the relative
relation of one variable to another. In other words, an advance/decline of 3-to-1 means there were 200%
more advancing issues than declining issues.
It struck me as odd that I could not find a true indicator based on a ratio. You may be thinking, ""What
about the ARMS Index (TRIN) or the Relative Strength Index (RSI)?"" They're both ratios aren't they?...
AUTHOR: William MasonDATE: SEP1989
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SIDEBAR: Normalization
ARTICLE SYNOPSIS ...Normalization
When comparing indicators, it helps to ""normalize"" the data first. This adjusts the values in both series to
values between zero and 100 and shows the relative movement between the two. As an example, I've
used advance/decline statistics....
AUTHOR: Technical Analysis, Inc.DATE: SEP1989
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Scale-down buying and scale-up selling by Jerry Kopf
ARTICLE SYNOPSIS ...Scale-down buying and scale-up selling
by Jerry Kopf
Professional traders, like the average retail speculator, are often right and often early. Good option
traders promptly jump on a developing trend. But the cost of buying a wasting asset too early saddles the
buyer with a temporary loss. Later, when the forecast proves correct and the calls climb sharply, the
benefit of scaling down becomes evident.
Of course, many traders will abide by the maxim: Never average a loss. For market makers, that may be a
good rule. In a bind they can hedge calls or puts with other options. The average retail ...
AUTHOR: Jerry KopfDATE: SEP1989
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The McClellan Oscillator by Richard Mogey
ARTICLE SYNOPSIS ...The McClellan Oscillator
by Richard Mogey
The earliest chartists used price data to evaluate markets and found that market prices continually
move from overbought to oversold and back again as if they were oscillating about an invisible, neutral
line. The need to learn when the market was overbought or oversold led analysts to search for ways other
than price to track the market. This led, in time, to the tracking of advances and declines. If a stock was
higher at the close than the previous day, it was said to advance. If it was lower, it was said to decline.
It became obvious, however, tha...
AUTHOR: Richard MogeyDATE: SEP1989
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Trading T-bonds with Equivolume by Thom Hartle
ARTICLE SYNOPSIS ...Trading T-bonds with Equivolume
by Thom Hartle
A technician attempts to identify areas of price where supply or demand will affect the value of an
item. If your method correctly responds to or forecasts the demand or supply entering the market, you
may profit by the price adjustment of that item.
A technique that helps me understand the subtle shifts in supply or demand (and consequently the change
in price) is Equivolume Charting developed by Richard W. Arms, Jr. Equivolume Charting lets me
visually interpret the relationship of volume to price movement in a way that traditional bar charts w...
AUTHOR: Thom HartleDATE: SEP1989
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Volume indices by Arthur Merrill
ARTICLE SYNOPSIS ...Volume indices
by Arthur Merrill
The ARMS Index, in the years since Richard Arms Jr. originated and described it in the August 7,
1967 issue of Barron's, has been called MKDS by Bunker Ramo, STKS by ADP, TRIN by Quotron and
the Short Term Trading Index. Market technicians, however, recommend the name ARMS Index.
The index has a simple formula:
...
If declining stocks are more active than advancing stocks, the index will be high and the indication
bearish (Figure 1). If advancing stocks are showing the most volume, the index will be low and N the
indications bullish.
However, analyst John ...
AUTHOR: Arthur A. Merrill, C.M.T.DATE: SEP1989