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Mikula Forecasting
Company: Trading Strategy #8
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Written by: Patrick Mikula CTA
Copyright (c)2003-06 by Patrick Mikula All Rights Reserved.
(Please to not copy or foreword this article).
Mikula Forecasting Company
P.O. Box 152672
Austin, TX 78715-2672
USA
www.MikulaForecasting.com
support@MikulaForecasting.com
====================
One of W.D. Gann's oldest techniques was to take a price
range and divide it by eight. The eight divisions of the
range was then used as retracement price levels and price
extension price levels. In this article we will discuss how
to use the Gann divisions of a range.
First Example:
The chart below shows a weekly chart for the S&P500. The
range being used is bounded by the 0% horizontal line and
the +100% horizontal line. Between the high and low of this
range only the 5/8 price division is shown. This is shown
because we will be looking at the 5/8 speed line. The speed
line is the diagonal lines that cuts across the chart from
left to right. The Gann divisions are being use to draw the
1/4 increment range extensions above the price range. These
are the lines marked 1-1/4, 1-1/2, 1-3-4, 200%, 2-1/4 and
2-1/2. After the price moved up from the bottom 0% degree
line the market moved up to point A and made a sideways
congestion area. At point A the S&P500 reached the
intersection of the 1-1/4 horizontal range extension line
and the 5/8 speed line. When the price reached this
intersection the market advance stopped temporarily. Now at
point B the market has again reached the 5/8 speed line but
now it is at the 2-1/4 horizontal range extension line. At
point B we would expect the market to again form a sideways
congestion area. For the next several weeks we would expect
to see the market advance stop.
MORE:
To see more of this article read the version
on the MarketWarrior
owners page.
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Mikula
Forecasting Company: Trading Strategy #8