The New Science of Technical Analysis

Chapter 1

Trendlines

Whether a trader is a practitioner of fundamental or of technical analysis, invariably, at one time or another, he has relied on trendlines to make his forecasts. Although trendlines are universally used, it is surprising how dissimilar they are in construction and interpretation, and how subjectively they are applied. Not only is it commonplace for different analysts to draw different trendlines representing the same data during the same time period, but the same individual, on separate occasions, will also draw two totally different trendlines based on the identical information, depending on his inclination each time. Consistency and uniformity are totally lacking. Not all the trendlines can be correct—only one is. Through exhaustive, painstaking research and years of experience and application, I have arrived at an effective method to select the two critical points that are essential to the proper construction of a trendline. Once learned and applied, trendline analysis is no longer subjective; instead, it becomes totally mechanical. Trendline breakouts are precisely defined and price objectives can be easily calculated: systems can actually be created. Price gaps and large price range moves assume a significance never before imagined.

Selection of TD Points™ and Construction of TD Lines™

Supply and demand dictate price movement. Specifically, should demand exceed supply, price advances; conversely, should supply exceed demand, price declines. These are ...