Investment Cycles

Charles D. Kirkpatrick, II, CMT and Julie Dahlquist, Ph.D., CMT

You may have seen how prices trend, but the trend does not occur in a straight line. Prices oscillate up and down around a trend. These oscillations form the trading ranges, patterns, and channels we have discussed. Could it be that these oscillations have some sort of regularity? Believing that they do, cycle analysts look at prices as a form of complex harmonics or waves. (In physics, a harmonic is a wave whose frequency is a whole number multiple of the frequency of another wave.) Most standard patterns can be broken down into cycle layers. For example, the head-and-shoulders pattern is a combination of a long cycle peaking with several smaller cycles forming ...