Technical Analysis of Stock Trends Book

Preface to the Ninth Edition     v
Preface to the Eighth Edition     ix
In Memoriam     xxiii
Prefaces to Previous Editions     xxv
Technical Theory
The Technical Approach to Trading and Investing     3
Technical vs. Fundamental Theory
Philosophy of Technical Approach
Drawbacks of Fundamental Approach
Charts     9
Different Types of Charts
Data Required
Arithmetic and Logarithmic Scales
The Dow Theory     13
The Forerunner of All Technical Theories
Use of Market Averages
Basic Tenets of Dow Theory
Characteristic Phases of Bull and Bear Trends
The Dow Theory in Practice     25
Applying Dow Theory to the Averages through 1941
The 1942 Action
The Bull Market Signal
The Secondary Correction of 1943
Bull Market Reaffirmed
The Spring of 1946
Third Phase Symptoms
The Bear Market Signal
The Dow Theory's Defects     41
Second Guessing
The "Too Late" Criticism
The Fifty-Year Record of Results
Little Help in Intermediate Term Trading
The Dow Theory in the 20th and 21st Centuries     45
Updating the Record of the Dow
Results to 2005
Reconsidering Dow Theory
Important Reversal Patterns     55
Divergence between Individual Stocks and Averages
Definition of Reversal and Reversal Formation
Time Required to Build
How Insiders Distribute
The Head-and-Shoulders Top Pattern
Volume Characteristics
Breaking theNeckline
Symmetry and Variations
Measuring Formula
Important Reversal Patterns - Continued     75
Head-and-Shoulders Bottoms
Volume and Breakout Differences
Multiple Head-and-Shoulders Patterns
Rounding Tops and Bottoms
Trading Activity on Rounding Turns
Dormant Bottoms
Patterns on Weekly and Monthly Charts
Important Reversal Patterns - The Triangles     99
Triangles
The Symmetrical Form
Volume
How Prices Break Out
A Theoretical Example
Reversal or Consolidation
Right Angle Triangles, Ascending and Descending
Measuring Implications
On Weekly and Monthly Charts
Important Reversal Patterns - Continued     129
Rectangles
Pool Tactics
Relation to Dow Line
Double and Triple Tops and Bottoms
Important Recognition Criteria
Completion and Breakout
Triple Tops and Bottoms
Other Reversal Phenomena     151
Broadening Formations
The Broadening Top
Right-Angles Broadening Patterns
Diamonds
Wedge Formations
The Falling Wedge
Rising Wedges in Bear Market Rallies
The One-Day Reversal
Selling Climax
Short-Term Phenomena of Potential Importance     181
Key Reversal Days
Spikes
Runaways
Consolidation Formations     189
Flags and Pennants
Pennant vs. Wedge
Measuring Formula
Reliability Tests for Flags and Pennants
On Weekly and Monthly Charts
Head-and-Shoulders Consolidations
Scallops and Saucers
Modern vs. Old-Style Markets
Gaps     211
Which Gaps Are Significant?
Common or Area Gaps
Breakaway Gaps Continuation or Runaway Gaps
Measuring Implications
Exhaustion Gaps
Island Reversals
Gaps in the Averages
Support and Resistance     231
Definition of Support and Resistance Levels
How They Reverse Their Roles
Reasons for Support/Resistance Phenomena
Tests for Determining Potential
Importance of Volume
Rules for Locating
Implications of a Breakthrough
Round Figures
Historical Levels
Panic Moves and Recoveries
Pattern Resistance
Support-Resistance in the Averages
Trendlines and Channels     253
Basic Trendlines
How They Form
Arithmetic vs. Logarithmic Scale
Intermediate Uptrends
Tests for Trendline Authority
Validity of Penetration
Throwback Moves
Amendment of Trendlines
Double Trendlines
Trend Channels
Practices to Avoid
Consequences of Penetration
Intermediate Downtrends
Corrective Trends
The Fan Principle
Major Trendlines     281
Different Forms of Major Uptrends
Arithmetic and Logarithmic Scaling
Tests for Significance
Major Downtrends
Major Trend Channels
Trendlines in the Averages
Trading the Averages in the 21st Century     295
Power of Trendlines in Trading the Averages
Redrawing the Trendlines as Markets Accelerate
Technical Analysis of Commodity Charts     301
Theoretical Application
Commodity Markets of the 20th (and 21st) Century Suitable for Technical Trading
Intrinsic Differences Between Stocks and Commodities as Trading Mediums
Technical Analysis of Commodity Charts, Part 2      307
A 21st Century Perspective
A Summary and Some Concluding Comments     319
Philosophy of Technical Approach
Review of Technical Methods
Need for Perspective
Patience
Technical Analysis and Technology in the 21st Century: The Computer and the Internet, Tools of the Investment/Information Revolution     325
The Computer and the Internet
Tools of the Investment/Information Revolution
Separating the Wheat from the Chaff
Advancements in Investment Technology     333
Options and Derivatives
Quantitative Analysis
Futures on Indexes
Options on Futures and Indexes
Modern Portfolio Theory
Importance to the Private Investor
Trading Tactics Midword     355
The Tactical Problem     359
Characteristics of Desirable Speculative Stocks
Strategy and Tactics for the Long-Term Investor     367
What's a Speculator, What's an Investor?
Strategy of the Long-term Investor (Hypothetical)
Rhythmic Investing
The All-Important Details     375
Source of Data
Suggestions on Chart Keeping
Using Computer Technology
The Kind of Stocks We Want - The Speculator's Viewpoint     379
Leverage
Swing Habit
Volatility
The Kind of Stocks We Want - The Long-Term Investor's Viewpoint     383
Changing Opinions about Conservative Investing
Index Shares and Similar Instruments
Importance of Modern Trading Instruments
Selection of Stocks to Chart     391
Character and Habits
Number
Advantages of Listed Issues
Selection of Stocks to Chart - Continued     395
Diversification
Price Range
Swing Power within Groups
Slow-Moving Groups
Choosing and Managing High-Risk Stocks: Tulip Stocks, Internet Sector, and Speculative Frenzies     401
Managing Speculative Frenzies and Runaways
The Probable Moves of Your Stocks     419
Choosing Stocks which Have the Potential to Move
Volatility
Two Touchy Questions     425
Use of Margin
Short Selling
Round Lots or Odd Lots?     433
Extra Cost of Odd Lots
Occasional Advantages
Determining Trade Size and Risk
Stop Orders     435
Protective Stops
Computing Stop Levels
Table of Stop Distances
Progressive Stops
What Is a Bottom - What Is a Top?     441
The Three Days Away Rule
Basing Points
Volume Signals
Basing Point Case Analyzed, Illustrated     446
Trendlines in Action     451
Buying Stock
Selling Long Stock
Selling Stock Short
Covering Short Sales
Additional Suggestions
Use of Support and Resistance     461
Formulating a Rule for Buying
When a Support Fails
Placing Stop Orders
Software for Determining Support-Resistance
Not All in One Basket     467
Diversification
Its Cost and Benefits
Trading Index Shares
Measuring Implications in Technical Chart Patterns     469
Reactions vs. Primary Moves
Tactical Review of Chart Action     473
Dow Theory
Head-and-Shoulders
Multiple Head-and-Shoulders
Rounding Tops and Bottoms
Triangles
Broadening Tops
Rectangles
Double Tops and Bottoms
Diamonds
Wedges
One-Day Reversals
Flags and Pennants
Gaps
Support and Resistance
Trendlines
A Quick Summation of Tactical Methods     501
When to Get Out
When to Get In
Effect of Technical Trading on Market Action     505
Many Types of Investors
Technicians a Minority Group
Persistence of Ingrained Evaluative Habits
Automated Trendline: The Moving Average     507
Sensitizing Moving Averages
Crossovers and Penetrations
"The Same Old Patterns"     513
Repetitive Character of Market Behavior Over the Years
Additional Chart Examples Covering Market Action up through 2005
Balanced and Diversified     577
The "Not All" Principle
The Evaluative Index
Reducing Risk and Anxiety
Identifying Bull and Bear Market Tops and Bottoms with the Magee Evaluative Index
Trial and Error     585
Putting Experience to Work
How Much Capital to Use in Trading     587
Application of Capital in Practice     591
Using Composite Leverage According to the Market's Condition
Overall Strategy
Portfolio Risk Management     597
Finding the Sensible Risk Posture
Overtrading and Undertrading
Controlling Risk per Trade
Risk of a Single Stock
Risk of a Portfolio
Pragmatic Portfolio Theory
Pragmatic Portfolio Risk Measurement
Pragmatic Portfolio Analysis
The Magee Method of Controlling the Risk
Stick to Your Guns     609
Chapters A-D
The Probable Moves of Your Stocks (Chapter 24 from the Seventh Edition)     611
Relative Sensitivity
The Market Reciprocal
Normal Range-for-Price-Volatility
A Discussion of Composite Leverage (Chapter 42 from the Seventh Edition)     613
Overtrading and a Paradox
The Composite Leverage Index of a Single Stock
Composite Leverage of a Portfolio
Investment Account Policy
Negative Composite Leverage
Normal Range-for-Price Indexes (Appendix B, Fifth Edition)     619
Sensitivity Indexes of Stocks (Appendix C, Fifth Edition)     621
Appendix B     629
The Mechanics of Building a Chart (Chapter 23 from the Fifth and Seventh Editions)
TEKNIPLAT Chart Paper
Technical Analysis of Futures Charts (Chapter 16 from the Seventh Edition by Richard McDermott)     639
Applications for the Use of Chart Patterns and Other Indicators in the Trading of Futures/Derivatives
Moving Averages, Bollinger Bands, Stochastics, and Others
Resources     669
Important Internet Sites
References for Further Study
Investment Oriented Sites
The Sharpe Ratio
Calculating Volatility
Gambler's Ruin
Essence of Fundamental Analysis
Useful Software and Specific Internet Technical Analysis Sites
Example of Trading Manual: Original Turtle Trading Systems and Procedures      681
List of Illustrations and Text Diagrams     703
Index of Charts by Stock Name     722
Glossary     743
Bibliography     769
Index     773