Oct. 07, 2008 - Pattern Recognition and the Stock Market - Dr ...

04/09/2304/09/23 Dr. Henrick JeantyDr. Henrick Jeanty

Pattern Recognition Pattern Recognition and the stock marketand the stock market

Is it possible to predict future prices Is it possible to predict future prices of stocks?of stocks?


The 2 types of analyses The 2 types of analyses of the marketof the market

There are two major analysis methods.There are two major analysis methods. Fundamental analysis (also known as Fundamental analysis (also known as

quantitative analysis)quantitative analysis)

Technical analysisTechnical analysis


Fundamental analysisFundamental analysis

A method of evaluating a stock by attempting to A method of evaluating a stock by attempting to measure its intrinsic value. Fundamental analysts study measure its intrinsic value. Fundamental analysts study everything from the overall economy and industry everything from the overall economy and industry conditions, to the financial condition and management conditions, to the financial condition and management of companies. of companies.

In other words, fundamental analysis is about using In other words, fundamental analysis is about using real data to evaluate a stock's value. The method uses real data to evaluate a stock's value. The method uses revenues, earnings, future growth, return on equity, revenues, earnings, future growth, return on equity, profit margins and other data to determine a company's profit margins and other data to determine a company's underlying value and potential for future growth. underlying value and potential for future growth.


Technical analysisTechnical analysis

Technical Analysis is the forecasting of future Technical Analysis is the forecasting of future financial price movements based on an financial price movements based on an examination of past price movements. Like examination of past price movements. Like weather forecasting, technical analysis does weather forecasting, technical analysis does not result in absolute predictions about the not result in absolute predictions about the future. Instead, technical analysis can help future. Instead, technical analysis can help investors anticipate what is "likely" to happen to investors anticipate what is "likely" to happen to prices over time. Technical analysis uses a prices over time. Technical analysis uses a wide variety of charts that show price over wide variety of charts that show price over time. time.


The three basic principles The three basic principles of Technical Analysisof Technical Analysis

Price Discounts EverythingPrice Discounts Everything Prices move in trendsPrices move in trends History repeats itselfHistory repeats itself


1. Price discounts 1. Price discounts everythingeverything

Technical analysts believe that the current Technical analysts believe that the current price fully reflects all information. Because all price fully reflects all information. Because all information is already reflected in the price, it information is already reflected in the price, it represents the fair value, and should form the represents the fair value, and should form the basis for analysis. After all, the market price basis for analysis. After all, the market price reflects the sum knowledge of all participants, reflects the sum knowledge of all participants, including traders, and …including traders, and …

Stock Market Technical analysis utilizes the Stock Market Technical analysis utilizes the information captured by the price to interpret information captured by the price to interpret what the market is saying with the purpose of what the market is saying with the purpose of forming a view on the future.forming a view on the future.


2. Prices Move in Trends 2. Prices Move in Trends

Technical analysts or chartists believe Technical analysts or chartists believe that profits can be made by following the that profits can be made by following the trends. In other words if the price has trends. In other words if the price has risen, they expect it to continue rising; if risen, they expect it to continue rising; if the price has fallen, they expect it to the price has fallen, they expect it to continue falling. However, most continue falling. However, most technicians also acknowledge that there technicians also acknowledge that there are periods when prices do not trend. are periods when prices do not trend.


3. History Repeats Itself 3. History Repeats Itself

Technical analysts believe that investors Technical analysts believe that investors repeat their behavior and they assume repeat their behavior and they assume that there is useful information hidden that there is useful information hidden within price histories; that it is a way of within price histories; that it is a way of analyzing the past actions of people in a analyzing the past actions of people in a particular market as reflected by their particular market as reflected by their actual transactions actual transactions


A stock chart. The DJIA stock chart. The DJI

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10,900.00

11,000.00

11,100.00

11,200.00

11,300.00

11,400.00

11,500.00

11,600.00

11,700.00

250M

500M

750M

$DJINov-21-2005 to Jun-27-2006 DAILY

Price

Volu

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Date12/9/05 12/30/05 1/23/06 2/10/06 3/3/06 3/23/06 4/12/06 5/3/06 5/23/06 6/13/06 7/3/06


CandlestickCandlestick

A graphical way to represent the price A graphical way to represent the price movement of a stock during a fixed movement of a stock during a fixed period of time.period of time.

It depicts the opening price, the high It depicts the opening price, the high price, the low price and the closing price price, the low price and the closing price for the period of time of interestfor the period of time of interest

The period can be as small as 1 minute The period can be as small as 1 minute and as long as a quarter (3 months)and as long as a quarter (3 months)


Anatomy of a candlestickAnatomy of a candlestick

The 2 types of candlesThe 2 types of candles


RetracementRetracement

After a stock has gained value, there is a After a stock has gained value, there is a tendency for the stock to give back some tendency for the stock to give back some of the gains in what is called a of the gains in what is called a retracement.retracement.

After a stock has lost value, there is a After a stock has lost value, there is a tendency for the stock to recoup some of tendency for the stock to recoup some of the losses in what is also called a the losses in what is also called a retracementretracement


The Jeanty Buy patternThe Jeanty Buy pattern Phase 1. Look for a downward price movement. Phase 1. Look for a downward price movement. Phase 2. Look for an upward retracement that bounces Phase 2. Look for an upward retracement that bounces

one or more times off the 38%, 50% or 62% one or more times off the 38%, 50% or 62% retracement levels. retracement levels.

Phase 3. Look for a resumption of the downward price Phase 3. Look for a resumption of the downward price movement and a bounce off the 38%, 50% or 62% movement and a bounce off the 38%, 50% or 62% extension price levels. extension price levels.

Phase 4. If you buy the stock at the confirmation of the Phase 4. If you buy the stock at the confirmation of the bounce, expect the target price to be the 0% extension bounce, expect the target price to be the 0% extension (or equivalently, the 0% retracement) which is the (or equivalently, the 0% retracement) which is the bottom of the downward price move seen in Phase 1.bottom of the downward price move seen in Phase 1.


ExtensionsExtensions

After a downward or upward move and After a downward or upward move and associated retracement, the downward or associated retracement, the downward or upward trend may resume. Price levels upward trend may resume. Price levels corresponding to an extension of the original corresponding to an extension of the original trend are called extensions. For instance, the trend are called extensions. For instance, the 50% extension represents the price that would 50% extension represents the price that would be reached if you were to add half the value of be reached if you were to add half the value of the original movement to the original move.the original movement to the original move.


$70.62 R: 0 (0/0) / S: 0 (0/0)

$71.11 R: 0 (0/0) / S: 100 (1/1)

$71.61 R: 50 (1/2) / S: 100 (2/2)

$77.37 R: 67 (2/3) / S: 44 (4/9)

$74.79 R: 67 (2/3) / S: 40 (2/5)

$75.29 R: 60 (3/5) / S: 57 (4/7)

$75.78 R: 60 (3/5) / S: 70 (7/10)

$73.20 R: 100 (4/4) / S: 0 (0/0)

1stSSS

SS

SS

S SS

R

R R

RR

R R

E

70.00

71.00

72.00

73.00

74.00

75.00

76.00

77.00

MO (Philip Morris Companies Inc:Tobacco:Consumer/Non-Cyclical)Nov-21-2005 to Jun-23-2006 DAILY

Pric

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Date

1/9/061/10/06

1/11/061/12/06

1/13/061/17/06

1/18/061/19/06

1/20/061/23/06

1/24/061/25/06

1/26/061/27/06

1/30/061/31/06

2/1/062/2/06

2/3/06


The Jeanty sell patternThe Jeanty sell pattern

Phase 1. Look for an upward price movement. Phase 1. Look for an upward price movement. Phase 2. Look for a downward retracement that Phase 2. Look for a downward retracement that

bounces one or more times off the 38%, 50% or 62% bounces one or more times off the 38%, 50% or 62% retracement levels. retracement levels.

Phase 3. Look for a resumption of the upward price Phase 3. Look for a resumption of the upward price movement and a bounce off the 38%, 50% or 62% movement and a bounce off the 38%, 50% or 62% extension price levels. extension price levels.

Phase 4. If you sell (or short) the stock at the Phase 4. If you sell (or short) the stock at the confirmation of the bounce, expect the stock to move confirmation of the bounce, expect the stock to move down to the 0% extension (or equivalently, the 0% down to the 0% extension (or equivalently, the 0% retracement) which is the top of the upward price move retracement) which is the top of the upward price move seen in Phase 1. seen in Phase 1.


$50.36 R: 0 (0/1) / S: 50 (1/2)

$49.97 R: 50 (1/2) / S: 50 (1/2)

$49.58 R: 86 (6/7) / S: 33 (1/3)

$48.31 R: 78 (7/9) / S: 57 (4/7)

$47.04 R: 40 (2/5) / S: 50 (3/6)

$46.65 R: 75 (12/16) / S: 40 (4/10)

$46.26 R: 56 (10/18) / S: 71 (12/17)

$44.99 R: 33 (2/6) / S: 89 (8/9)

1st

SS

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45.00

45.50

46.00

46.50

47.00

47.50

48.00

48.50

49.00

49.50

50.00

50.50

WMT (Wal-Mart Stores Inc:Retail- Department & Discount:Services)Nov-21-2005 to Jun-23-2006 DAILY

Pric

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Date

4/26/064/27/06

4/28/065/1/06

5/2/065/3/06

5/4/065/5/06

5/8/065/9/06

5/10/065/11/06

5/12/065/15/06

5/16/065/17/06

5/18/065/19/06

5/22/065/23/06

5/24/065/25/06


Is this true?Is this true?

SELL $31.39 R: 0 (0/0) / S: 0 (0/0)

$29.91 R: 0 (0/0) / S: 0 (0/0)

$28.43 R: 0 (0/0) / S: 0 (0/0)

$23.65 R: 100 (1/1) / S: 0 (0/0)

$18.87 R: 50 (1/2) / S: 0 (0/0)

$17.39 R: 0 (0/1) / S: 0 (0/1)

$15.91 R: 50 (1/2) / S: 0 (0/1)

$11.13 R: 0 (0/0) / S: 100 (1/1)L

H

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10.00

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25.00

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35.00

40.00

45.00

250K500K750K

JBL (Jabil Circuit Inc:Electronic Instr. & Controls:Technology)Sep-01-2002 to Jun-01-2006 MONTHLY

Price

Volu

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Date1/1/03 6/1/03 11/1/03 4/1/04 9/1/04 2/1/05 7/1/05 12/1/05 5/1/06 6/7/06


The next stepThe next step

SELL

$45.55 R: 0 (0/0) / S: 0 (0/0)

$43.04 R: 0 (0/0) / S: 0 (0/0)

$40.52 R: 0 (0/0) / S: 0 (0/0)

$32.40 R: 100 (1/1) / S: 0 (0/0)

$24.28 R: 67 (2/3) / S: 0 (0/0)

$21.76 R: 50 (1/2) / S: 50 (1/2)

$19.25 R: 60 (3/5) / S: 0 (0/1)

$11.13 R: 0 (0/0) / S: 100 (1/1)L

H

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10.00

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25.00

30.00

35.00

40.00

45.00

250K500K750K


Price

Volu

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Date1/1/03 6/1/03 11/1/03 4/1/04 9/1/04 2/1/05 7/1/05 12/1/05 5/1/06 6/7/06


$63.83 R: 0 (0/0) / S: 0 (0/0)

$59.99 R: 0 (0/0) / S: 0 (0/0)

$56.13 R: 0 (0/0) / S: 0 (0/0)

$43.70 R: 100 (1/1) / S: 0 (0/0)

$31.27 R: 86 (6/7) / S: 0 (0/1)

$27.41 R: 0 (0/4) / S: 67 (6/9)

$23.57 R: 57 (4/7) / S: 67 (2/3)

$11.13 R: 0 (0/0) / S: 100 (1/1)L

H

S

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Date1/1/03 6/1/03 11/1/03 4/1/04 9/1/04 2/1/05 7/1/05 12/1/05 5/1/06 6/7/06


Wal-martWal-mart$50.14 R: 0 (0/0) / S: 0 (0/0)

$49.76 R: 0 (0/0) / S: 0 (0/0)

$49.38 R: 0 (0/0) / S: 0 (0/0)

$48.17 R: 88 (7/8) / S: 50 (2/4)

$46.96 R: 86 (6/7) / S: 33 (1/3)

$46.58 R: 64 (9/14) / S: 60 (6/10)

$46.20 R: 67 (8/12) / S: 60 (6/10)

$44.99 R: 20 (1/5) / S: 86 (6/7)

SSS

S

S

S

R

R

R

R

E

45.00

45.50

46.00

46.50

47.00

47.50

48.00

48.50

49.00

49.50

50.00

WMT (Wal-Mart Stores Inc:Retail- Department & Discount:Services)Jan-23-2006 to Jun-27-2006 DAILY

Price

Date4/26/06 4/28/06 5/2/06 5/4/06 5/8/06 5/10/06 5/12/06 5/16/06 5/18/06 5/22/06 5/24/06 5/26/06 5/31/06


$50.36 R: 0 (0/0) / S: 0 (0/0)

$49.97 R: 0 (0/0) / S: 0 (0/0)

$49.58 R: 0 (0/0) / S: 0 (0/0)

$48.31 R: 80 (4/5) / S: 0 (0/1)

$47.04 R: 40 (2/5) / S: 50 (2/4)

$46.65 R: 71 (10/14) / S: 40 (4/10)

$46.26 R: 57 (8/14) / S: 71 (10/14)

$44.99 R: 20 (1/5) / S: 86 (6/7)

1st

SS

S

S

RR

E

45.00

45.50

46.00

46.50

47.00

47.50

48.00

48.50

49.00

49.50

50.00

50.50


Pric

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Date4/21/06 4/26/06 5/1/06 5/4/06 5/9/06 5/12/06 5/17/06 5/22/06 5/25/06 5/31/06


$53.10 R: 0 (0/0) / S: 0 (0/0)

$52.51 R: 0 (0/0) / S: 0 (0/0)

$51.91 R: 0 (0/0) / S: 0 (0/0)

$50.00 R: 100 (1/1) / S: 0 (0/0)

$48.09 R: 100 (9/9) / S: 60 (3/5)

$47.49 R: 50 (4/8) / S: 50 (4/8)

$46.90 R: 75 (6/8) / S: 25 (2/8)

$44.99 R: 20 (1/5) / S: 86 (6/7)

H

S

S

S

S

SS

S

S S

SR

R

R

R R

RR

45.00

45.50

46.00

46.50

47.00

47.50

48.00

48.50

49.00

49.50

50.00


Pric

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Date4/24/06 4/28/06 5/4/06 5/10/06 5/16/06 5/22/06 5/26/06 6/2/06 6/8/06 6/14/06 6/20/06 6/26/06


Detailed Analysis of the Detailed Analysis of the DOW over the last weeksDOW over the last weeks

10,600.00

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11,000.00

11,100.00

11,200.00

11,300.00

11,400.00

11,500.00

11,600.00

11,700.00

0.5B1.0B1.5B2.0B

$DJIJan-01-2006 to Jun-25-2006 WEEKLY

Price

Volu

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Date1/15/06 2/5/06 2/26/06 3/19/06 4/9/06 4/30/06 5/21/06 6/11/06 6/26/06 6/29/06


First patternFirst pattern

$11156.95 R: 0 (0/0) / S: 0 (0/0)

$11120.78 R: 0 (0/0) / S: 0 (0/0)

$11084.53 R: 0 (0/0) / S: 0 (0/0)

$10967.57 R: 100 (3/3) / S: 0 (0/0)

$10850.61 R: 0 (0/2) / S: 0 (0/2)

$10814.36 R: 0 (0/2) / S: 0 (0/2)

$10778.19 R: 0 (0/2) / S: 0 (0/1)

$10661.15 R: 0 (0/0) / S: 100 (1/1)L

1st

S

S

S

R

RRR

RR

RE

10,600.00

10,700.00

10,800.00

10,900.00

11,000.00

11,100.00

11,200.00

11,300.00


Pric

e

Date1/8/06 1/15/06 1/22/06 1/29/06 2/5/06 2/12/06 2/19/06 2/26/06 3/5/06


$11419.69 R: 0 (0/0) / S: 0 (0/0)

$11369.94 R: 0 (0/0) / S: 0 (0/0)

$11320.07 R: 0 (0/0) / S: 0 (0/0)

$11159.18 R: 100 (1/1) / S: 0 (0/0)

$10998.29 R: 50 (1/2) / S: 0 (0/0)

$10948.42 R: 50 (2/4) / S: 50 (1/2)

$10898.67 R: 0 (0/3) / S: 33 (1/3)

$10737.67 R: 0 (0/2) / S: 50 (1/2)

H

1st

S

SS

R

E

10,700.00

10,800.00

10,900.00

11,000.00

11,100.00

11,200.00

11,300.00

11,400.00

11,500.00

11,600.00


Pric

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Date1/15/06 1/22/06 1/29/06 2/5/06 2/12/06 2/19/06 2/26/06 3/5/06 3/12/06 3/19/06 3/26/06 4/2/06


SELL

$11466.98 R: 0 (0/0) / S: 0 (0/0)

$11408.20 R: 0 (0/0) / S: 0 (0/0)

$11349.28 R: 0 (0/0) / S: 0 (0/0)

$11159.18 R: 100 (1/1) / S: 0 (0/0)

$10969.08 R: 50 (1/2) / S: 0 (0/0)

$10910.16 R: 50 (2/4) / S: 50 (1/2)

$10851.38 R: 0 (0/3) / S: 33 (1/3)

$10661.15 R: 0 (0/0) / S: 100 (1/1)L

H

1st

S

S

R

R

R R

E

10,600.00

10,700.00

10,800.00

10,900.00

11,000.00

11,100.00

11,200.00

11,300.00

11,400.00

11,500.00

11,600.00

11,700.00


Pric

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Date

1/8/061/15/06

1/22/061/29/06

2/5/062/12/06

2/19/062/26/06

3/5/063/12/06

3/19/063/26/06

4/2/064/9/06

4/16/064/23/06

4/30/065/7/06

5/14/06


SELL

$11751.39 R: 0 (0/0) / S: 0 (0/0)

$11671.87 R: 0 (0/0) / S: 0 (0/0)

$11592.15 R: 0 (0/0) / S: 0 (0/0)

$11334.96 R: 100 (1/1) / S: 0 (0/0)

$11077.77 R: 50 (2/4) / S: 0 (0/1)

$10998.05 R: 50 (1/2) / S: 100 (2/2)

$10918.53 R: 40 (2/5) / S: 0 (0/1)

$10661.15 R: 0 (0/0) / S: 100 (1/1)L

H

1st

S S

S

S

S

R

E

10,600.00

10,700.00

10,800.00

10,900.00

11,000.00

11,100.00

11,200.00

11,300.00

11,400.00

11,500.00

11,600.00

11,700.00

0.5B1.0B1.5B2.0B


Pric

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Date1/15/06 2/5/06 2/26/06 3/19/06 4/9/06 4/30/06 5/21/06 6/11/06 6/26/06 6/29/06


$11704.10 R: 0 (0/0) / S: 0 (0/0)

$11633.61 R: 0 (0/0) / S: 0 (0/0)

$11562.95 R: 0 (0/0) / S: 0 (0/0)

$11334.96 R: 100 (1/1) / S: 0 (0/0)

$11106.97 R: 33 (1/3) / S: 0 (0/1)

$11036.31 R: 33 (1/3) / S: 50 (1/2)

$10965.82 R: 75 (3/4) / S: 100 (1/1)

$10737.67 R: 0 (0/2) / S: 50 (1/2)

H

1st

S

S S

S

S

S

RR

E

10,600.00

10,700.00

10,800.00

10,900.00

11,000.00

11,100.00

11,200.00

11,300.00

11,400.00

11,500.00

11,600.00

11,700.00

0.5B1.0B1.5B2.0B


Pric

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Date1/15/06 2/5/06 2/26/06 3/19/06 4/9/06 4/30/06 5/21/06 6/11/06 6/26/06 6/29/06


$11589.73 R: 0 (0/0) / S: 0 (0/0)

$11541.08 R: 0 (0/0) / S: 0 (0/0)

$11492.31 R: 0 (0/0) / S: 0 (0/0)

$11334.96 R: 100 (1/1) / S: 0 (0/0)

$11177.61 R: 0 (0/1) / S: 0 (0/0)

$11128.84 R: 75 (3/4) / S: 0 (0/0)

$11080.19 R: 50 (2/4) / S: 0 (0/1)

$10922.73 R: 60 (3/5) / S: 67 (2/3)

H

1st

S SS

S

S

SS

RR

R

RRR

E

10,600.00

10,700.00

10,800.00

10,900.00

11,000.00

11,100.00

11,200.00

11,300.00

11,400.00

11,500.00

11,600.00

11,700.00

0.5B1.0B1.5B2.0B


Pric

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Date1/15/06 2/5/06 2/26/06 3/19/06 4/9/06 4/30/06 5/21/06 6/11/06 6/26/06 6/29/06


BUY

$10635.10 R: 0 (0/0) / S: 0 (0/0)

$10710.61 R: 0 (0/0) / S: 0 (0/0)

$10786.29 R: 0 (0/0) / S: 0 (0/0)

$11670.19 R: 0 (0/0) / S: 100 (1/1)

$11274.65 R: 0 (0/0) / S: 0 (0/1)

$11350.33 R: 0 (0/1) / S: 33 (1/3)

$11425.84 R: 50 (2/4) / S: 0 (0/2)

$11030.47 R: 100 (1/1) / S: 0 (0/0)

H

L

1st S

S

R R

R

R

RE

10,700.00

10,800.00

10,900.00

11,000.00

11,100.00

11,200.00

11,300.00

11,400.00

11,500.00

11,600.00

11,700.00

200M300M400M

500M

$DJIMay-01-2006 to Jun-27-2006 DAILY

Pric

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Date5/4/06 5/10/06 5/16/06 5/22/06 5/26/06 6/2/06 6/8/06 6/14/06 6/20/06 6/26/06 6/30/06


$10764.67 R: 0 (0/0) / S: 0 (0/0)

$10815.43 R: 0 (0/0) / S: 0 (0/0)

$10866.31 R: 0 (0/0) / S: 0 (0/0)

$11460.55 R: 0 (0/0) / S: 100 (1/1)

$11194.63 R: 100 (1/1) / S: 50 (1/2)

$11245.51 R: 100 (1/1) / S: 0 (0/1)

$11296.27 R: 0 (0/0) / S: 0 (0/1)

$11030.47 R: 67 (2/3) / S: 0 (0/1)L

1st

SS

SSS

S

R

R

R

RE

10,700.00

10,800.00

10,900.00

11,000.00

11,100.00

11,200.00

11,300.00

11,400.00

11,500.00

11,600.00

11,700.00

200M300M400M

500M


Pric

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Date5/4/06 5/10/06 5/16/06 5/22/06 5/26/06 6/2/06 6/8/06 6/14/06 6/20/06 6/26/06 6/30/06

04/09/2304/09/23 Dr. Henrick JeantyDr. Henrick Jeanty $10098.53 R: 0 (0/0) / S: 0 (0/0)

$10213.18 R: 0 (0/0) / S: 0 (0/0)

$10328.09 R: 0 (0/0) / S: 0 (0/0)

$11670.19 R: 0 (0/0) / S: 100 (1/1)

$11069.61 R: 100 (2/2) / S: 67 (2/3)

$11184.52 R: 33 (1/3) / S: 25 (1/4)

$11299.17 R: 0 (0/0) / S: 0 (0/1)

$10698.85 R: 100 (1/1) / S: 0 (0/0)

H

L

R R

10,700.00

10,800.00

10,900.00

11,000.00

11,100.00

11,200.00

11,300.00

11,400.00

11,500.00

11,600.00

11,700.00

200M300M400M

500M


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Date5/4/06 5/10/06 5/16/06 5/22/06 5/26/06 6/2/06 6/8/06 6/14/06 6/20/06 6/26/06 6/30/06


$10228.10 R: 0 (0/0) / S: 0 (0/0)

$10318.00 R: 0 (0/0) / S: 0 (0/0)

$10408.11 R: 0 (0/0) / S: 0 (0/0)

$11460.55 R: 0 (0/0) / S: 100 (1/1)

$10989.59 R: 0 (0/0) / S: 50 (1/2)

$11079.70 R: 100 (1/1) / S: 75 (3/4)

$11169.60 R: 67 (4/6) / S: 0 (0/3)

$10698.85 R: 67 (2/3) / S: 0 (0/1)L

S S S

R

R

10,700.00

10,800.00

10,900.00

11,000.00

11,100.00

11,200.00

11,300.00

11,400.00

11,500.00

11,600.00

11,700.00

200M300M400M

500M


Pric

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Date5/4/06 5/10/06 5/16/06 5/22/06 5/26/06 6/2/06 6/8/06 6/14/06 6/20/06 6/26/06 6/30/06


$10336.08 R: 0 (0/0) / S: 0 (0/0)

$10405.36 R: 0 (0/0) / S: 0 (0/0)

$10474.80 R: 0 (0/0) / S: 0 (0/0)

$11285.82 R: 0 (0/0) / S: 100 (1/1)

$10922.90 R: 100 (1/1) / S: 50 (1/2)

$10992.34 R: 0 (0/0) / S: 50 (1/2)

$11061.62 R: 100 (2/2) / S: 67 (2/3)

$10698.85 R: 100 (1/1) / S: 0 (0/1)L

S

S

S S

S

R

R R RR

10,700.00

10,800.00

10,900.00

11,000.00

11,100.00

11,200.00

11,300.00

11,400.00

11,500.00

11,600.00

11,700.00

200M300M400M

500M


Pric

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Date5/4/06 5/10/06 5/16/06 5/22/06 5/26/06 6/2/06 6/8/06 6/14/06 6/20/06 6/26/06 6/30/06


$47.70 R: 0 (0/0) / S: 0 (0/0)

$47.81 R: 0 (0/0) / S: 0 (0/0)

$47.92 R: 0 (0/0) / S: 0 (0/0)

$49.19 R: 0 (0/1) / S: 100 (3/3)

$48.62 R: 0 (0/1) / S: 50 (1/2)

$48.73 R: 50 (2/4) / S: 83 (5/6)

$48.84 R: 50 (3/6) / S: 88 (7/8)

$48.27 R: 100 (1/1) / S: 0 (0/0)

H

LS

SS

S

S

S

SSS

S SS

SS SS

R R

R

R

RR R

E

47.60

47.80

48.00

48.20

48.40

48.60

48.80

49.00

49.20

WMT (Wal-Mart Stores Inc:Retail- Department & Discount:Services)Jun-21-2006 to Jun-27-2006 INTRADAY

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Date06/22 09:00 06/22 12:00 06/22 15:00 06/23 10:00 06/23 13:00 06/23 16:00 06/26 11:00 06/26 14:00 06/27 09:00 06/27 12:00


ScalesScales

These patterns occur at all scales:These patterns occur at all scales: They occur at intraday, daily, weekly and They occur at intraday, daily, weekly and

monthly scales.monthly scales. Following is a chart of these patterns at Following is a chart of these patterns at

an intraday scale for Microsoftan intraday scale for Microsoft


$22.56 R: 20 (1/5) / S: 100 (8/8)

$22.60 R: 75 (6/8) / S: 100 (8/8)

$22.64 R: 89 (8/9) / S: 86 (6/7)

$23.17 R: 75 (3/4) / S: 100 (2/2)

$22.94 R: 83 (5/6) / S: 86 (6/7)

$22.98 R: 80 (4/5) / S: 83 (5/6)

$23.02 R: 50 (2/4) / S: 80 (4/5)

$22.79 R: 100 (4/4) / S: 0 (0/1)

H

SS

S

S

S

S

SS

RR

RRR

RR R

RRR

R

E

$23.13 R: 100 (6/6) / S: 33 (1/3)

$23.09 R: 100 (6/6) / S: 75 (3/4)

$23.04 R: 60 (3/5) / S: 80 (4/5)

$22.89 R: 91 (10/11) / S: 78 (7/9)

$22.74 R: 67 (8/12) / S: 83 (10/12)

$22.69 R: 75 (9/12) / S: 69 (9/13)

$22.65 R: 80 (8/10) / S: 82 (9/11)

$22.50 R: 50 (1/2) / S: 100 (8/8)

S S

S

S

S

SS

S

R R

RR

R

R

RR

RR

RR R

RRR

E

44 H:23.03

43 L:22.91

41 H:23.16

37 L:22.79

37 H:22.88 33 H:22.89

30 L:22.50

27 H:22.86

24 L:22.70

22 H:23.10

21 L:22.78 19 L:22.79

16 H:23.17 13 H:23.15

10 H:22.94

8 L:22.53

6 L:22.50

2 H:22.74

1 L:22.51

0 H:22.76

22.50

22.60

22.70

22.80

22.90

23.00

23.10

23.20

MSFT (Microsoft Corp:Software & Programming:Technology)Jun-20-2006 to Jun-27-2006 INTRADAY

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Date

06/21 15:0006/22 10:00

06/22 13:0006/22 16:00

06/23 11:0006/23 14:00

06/26 09:0006/26 12:00

06/26 15:0006/27 10:00

06/27 13:0006/27 16:00


Do events affect stocks?Do events affect stocks?

$67.07 R: 0 (0/0) / S: 0 (0/0)

$68.14 R: 0 (0/0) / S: 0 (0/0)

$69.20 R: 0 (0/0) / S: 0 (0/0)

$81.68 R: 0 (0/0) / S: 100 (1/1)

$76.10 R: 0 (0/0) / S: 50 (1/2)

$77.17 R: 50 (1/2) / S: 60 (3/5)

$78.23 R: 80 (4/5) / S: 33 (1/3)

$72.65 R: 80 (8/10) / S: 82 (9/11)L

1st

S

SSS

S

S

R

R

RR

E

66.00

68.00

70.00

72.00

74.00

76.00

78.00

80.00

82.00

AIG (American International Group Inc:Insurance- Prop. & Casualty:Financial)Apr-25-2001 to Nov-28-2001 DAILY

Pric

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Date8/14/01 8/16/01 8/20/01 8/22/01 8/24/01 8/28/01 8/30/01 9/4/01 9/6/01 9/10/01 9/18/01 9/20/01 9/24/01 9/26/01


BUY

$90.23 R: 0 (0/0) / S: 0 (0/0)

$92.39 R: 0 (0/0) / S: 0 (0/0)

$94.56 R: 0 (0/0) / S: 0 (0/0)

$119.90 R: 0 (0/1) / S: 100 (2/2)

$108.56 R: 0 (0/0) / S: 0 (0/1)

$110.73 R: 0 (0/0) / S: 0 (0/1)

$112.89 R: 60 (6/10) / S: 67 (6/9)

$101.56 R: 100 (2/2) / S: 0 (0/0)

H

L

1st

S

S

S S

S

RRR

R

RR

R R

R

R

R

E

85.00

90.00

95.00

100.00

105.00

110.00

115.00

120.00

0

10M

20M

IBM (International Business Machines Corp:Computer Hardware:Technology)Apr-25-2001 to Nov-28-2001 DAILY

Pric

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Date5/14/01 6/4/01 6/22/01 7/13/01 8/2/01 8/22/01 9/18/01 10/8/01 10/26/01 11/15/01


BUY

$6.64 R: 0 (0/0) / S: 0 (0/0)

$7.42 R: 0 (0/0) / S: 0 (0/0)

$8.21 R: 0 (0/0) / S: 0 (0/0)

$17.40 R: 0 (0/0) / S: 100 (2/2)

$13.29 R: 100 (2/2) / S: 100 (2/2)

$14.08 R: 75 (6/8) / S: 60 (3/5)

$14.86 R: 40 (2/5) / S: 83 (5/6)

$10.75 R: 100 (1/1) / S: 0 (0/0)

H

L

1st

S

S

S S

S

S

S

SSS

SS

S

S

RR R

R

R

RR RR

RRR

RR

R

E

6.00

7.00

8.00

9.00

10.00

11.00

12.00

13.00

14.00

15.00

16.00

17.00

FRNT (Frontier Airlines Inc:Airline:Transportation)Apr-30-2001 to Oct-29-2001 DAILY

Pric

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Date6/6/01 6/19/01 7/2/01 7/16/01 7/27/01 8/9/01 8/22/01 9/5/01 9/24/01 10/5/01 10/18/01


$25.37 R: 0 (0/0) / S: 0 (0/0)

$25.77 R: 0 (0/0) / S: 0 (0/0)

$26.17 R: 0 (0/1) / S: 100 (3/3)

$30.87 R: 45 (5/11) / S: 79 (11/14)

$28.77 R: 60 (6/10) / S: 80 (4/5)

$29.17 R: 40 (2/5) / S: 78 (7/9)

$29.57 R: 38 (3/8) / S: 62 (5/8)

$27.47 R: 100 (5/5) / S: 0 (0/0)

1st

SS S

R

RR

E

25.50

26.00

26.50

27.00

27.50

28.00

28.50

29.00

29.50

30.00

30.50

31.00

MCD (McDonald's Corp:Restaurants:Services)Apr-25-2001 to Nov-28-2001 DAILY

Pric

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Date

8/28/018/29/01

8/30/018/31/01

9/4/019/5/01

9/6/019/7/01

9/10/019/17/01

9/18/019/19/01

9/20/019/21/01

9/24/019/25/01

9/26/019/27/01

9/28/0110/1/01

10/2/0110/3/01

10/4/0110/5/01


$28.36 R: 0 (0/0) / S: 0 (0/0)

$29.52 R: 0 (0/0) / S: 0 (0/0)

$30.68 R: 0 (0/0) / S: 0 (0/0)

$44.25 R: 0 (0/0) / S: 100 (1/1)

$38.18 R: 0 (0/1) / S: 0 (0/2)

$39.34 R: 100 (2/2) / S: 33 (1/3)

$40.50 R: 67 (4/6) / S: 0 (0/1)

$34.43 R: 22 (2/9) / S: 67 (8/12)L

1st

S

S

S

S SS

SSS

S

R

R

R R R

RR

R

RE

28.00

30.00

32.00

34.00

36.00

38.00

40.00

42.00

44.00

AL (Alcan Inc:Metal Mining:Basic Materials)Apr-25-2001 to Nov-28-2001 DAILY

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Date7/13/01 7/25/01 8/6/01 8/16/01 8/28/01 9/10/01 9/26/01 10/8/01 10/18/01 10/30/01 11/9/01 11/21/01


Were there patterns giving Were there patterns giving out signals recently? (Oct. out signals recently? (Oct. 2008)2008)

Yes there were. Google produced 3 Buy Yes there were. Google produced 3 Buy patterns and Buy signals. patterns and Buy signals.

One on July 21, 2008One on July 21, 2008 One on September 10, 2008One on September 10, 2008 One on October 8, 2008 One on October 8, 2008


Google: Buy signal Google: Buy signal July 21, 2008July 21, 2008


Google: Buy signal Google: Buy signal September 10, 2008September 10, 2008


Google: Buy signal Google: Buy signal October 8, 2008October 8, 2008


Google: What happened Google: What happened after those Buy signals?after those Buy signals?

Remembering that the target prices are the bottom of the red Remembering that the target prices are the bottom of the red rectangles we have the following Buy prices (assuming buying at rectangles we have the following Buy prices (assuming buying at the close on the day of the signal), target prices and potential the close on the day of the signal), target prices and potential percentage gains:percentage gains:

July 21: Buy:$468.80 Target:$501.10 Potential %Gain: 6.89%July 21: Buy:$468.80 Target:$501.10 Potential %Gain: 6.89% Sept.10: Buy:$414.16 Target:$461.90 Potential %Gain:11.53%Sept.10: Buy:$414.16 Target:$461.90 Potential %Gain:11.53% Oct. 8: Buy:$338.11 Target:$380.71 Potential %Gain:12.60%Oct. 8: Buy:$338.11 Target:$380.71 Potential %Gain:12.60%


Did GOOG actually reach Did GOOG actually reach those target prices?those target prices?

To answer the question we simply need To answer the question we simply need to look at the days following the buy to look at the days following the buy signals.signals.


What happened after What happened after July 21, 2008?July 21, 2008?


So, what happened after So, what happened after July 21, 2008?July 21, 2008?

Looking at the chart we can see that GOOG reached its target Looking at the chart we can see that GOOG reached its target price of $501.10 on August 11, 2008, 15 bars after the signal, or price of $501.10 on August 11, 2008, 15 bars after the signal, or 21 days after the signal.21 days after the signal.

GOOG gained $32.02 (6.89%) in 21 days.GOOG gained $32.02 (6.89%) in 21 days. After hitting its target, GOOG has only gone down since then.After hitting its target, GOOG has only gone down since then. This almost looks like we were able to time the market for GOOG. This almost looks like we were able to time the market for GOOG.

We bought at a low ($468.80) and sold at (almost) high ($501.10)We bought at a low ($468.80) and sold at (almost) high ($501.10) Note how on Aug. 11, GOOG reached a high of $508.88 ($7.78 Note how on Aug. 11, GOOG reached a high of $508.88 ($7.78

above the target price) only to close at $500.84, only 26 cents above the target price) only to close at $500.84, only 26 cents below the target price of $501.10below the target price of $501.10

GOOG closed 0.05% below the target price. How accurate!GOOG closed 0.05% below the target price. How accurate! It looks like GOOG was “homing” in on the target price. It looks like GOOG was “homing” in on the target price.


What happened after What happened after September 10, 2008?September 10, 2008?


So, what happened after So, what happened after September 10, 2008?September 10, 2008?

Looking at the chart we can see that GOOG reached its target Looking at the chart we can see that GOOG reached its target price of $461.90 on Sept. 19, 2008, 7 bars after the signal, or 9 price of $461.90 on Sept. 19, 2008, 7 bars after the signal, or 9 days after the signal.days after the signal.

GOOG gained $47.74 (11.53%) in 9 days.GOOG gained $47.74 (11.53%) in 9 days. After hitting its target, GOOG has only gone down since then.After hitting its target, GOOG has only gone down since then. Again it looks like we were able to time the market for GOOG. We Again it looks like we were able to time the market for GOOG. We

bought at a low ($414.16) and sold at a high ($461.90).bought at a low ($414.16) and sold at a high ($461.90). Note how on Sept. 19, GOOG opened at $461.00 (90 cents below Note how on Sept. 19, GOOG opened at $461.00 (90 cents below

the target, or 0.2% below the target) then reached a high of the target, or 0.2% below the target) then reached a high of $462.07 (17 cents above the target price, or only 0.037% above $462.07 (17 cents above the target price, or only 0.037% above the target) then retreated to close at $449.15the target) then retreated to close at $449.15

Again an example of accuracy in the prediction of the target. Again an example of accuracy in the prediction of the target. It looks like GOOG was “homing” in on the target price. It looks like GOOG was “homing” in on the target price.


What happened after What happened after October 8, 2008?October 8, 2008?


So, what happened after So, what happened after October 8, 2008?October 8, 2008?

Looking at the chart we can see that GOOG reached its target Looking at the chart we can see that GOOG reached its target price of $380.71 on Oct. 13, 2008, 3 bars after the buy signal, or 5 price of $380.71 on Oct. 13, 2008, 3 bars after the buy signal, or 5 days after the buy signal.days after the buy signal.

GOOG gained $42.60 (12.60%) in 5 days.GOOG gained $42.60 (12.60%) in 5 days. After hitting its target, GOOG has only gone down (as of this After hitting its target, GOOG has only gone down (as of this

writing).writing). Again it looks like we were able to time the market for GOOG. We Again it looks like we were able to time the market for GOOG. We

bought at a low ($338.11) and sold at a (almost) high of ($380.71).bought at a low ($338.11) and sold at a (almost) high of ($380.71). Note how on Oct. 13, GOOG reached a high of $381.95 ($1.24 Note how on Oct. 13, GOOG reached a high of $381.95 ($1.24

above the target or 0.33%) and closed at $381.02 (31 cents above above the target or 0.33%) and closed at $381.02 (31 cents above the target or 0.08%). Again, an example of accuracy in the the target or 0.08%). Again, an example of accuracy in the prediction of the target. prediction of the target.

Again, It looks like GOOG was “homing” in on the target price. Again, It looks like GOOG was “homing” in on the target price.


The 3 patterns togetherThe 3 patterns together


RecapRecap

The last three examples show the power of some technical The last three examples show the power of some technical analysis.analysis.

They have occurred over just the last 4 months.They have occurred over just the last 4 months. The accuracy with which the target prices have been hit is The accuracy with which the target prices have been hit is

remarkable. remarkable. The gains occurred over short periods of time.The gains occurred over short periods of time. GOOG is not the only example of such patterns.GOOG is not the only example of such patterns.


ConclusionsConclusions

Technical Analysis can help understand Technical Analysis can help understand certain price movements.certain price movements.

Technical Analysis can help predict Technical Analysis can help predict certain price movements.certain price movements.

Date post:	01-Dec-2014
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