Trading with Charts for Absolute Return

THE BASIC STRUCTURE OF THE PHI-ELLIPSE

Analyzing peaks and valleys alone is much more helpful when looking for absolute return results than reading newspapers, checking news channels, or studying corporate annual reports. I know that I repeat myself in stressing again the importance of peaks and valleys. But this is all that will be used in the analysis with the PHI-ellipse.

The History of the PHI-Ellipse as a Trading Tool

I was very lucky that in the late 1970s, while I was a broker with Dean Witter Reynolds in Germany, I was introduced to Fibonacci and Elliott's wave principles. But even more important, I discovered that price data can be analyzed with a PHI-ellipse.

The first PHI-ellipse I worked with in those days was cut out of a piece of plastic. It worked great for a time, and especially well on U.S. Treasury Bonds, which traded in the early 1980s at a price range between $45 and $60. The TSY-Bond prices moved exactly in the shape of my plastic ellipse, and when the lower end of the ellipse was reached, I could buy, and when the upper end was reached, I could sell. But then the price behavior of the U.S. Treasury Bonds changed and my plastic PHI-ellipse did not work anymore. Why? A new wave structure based on a change in investor behavior had developed, and I could not adjust my plastic PHI-ellipse to the new price patterns.

Ever since then, I tried to work with the PHI-ellipse again. In the books I published with John Wiley in 2000 and 2003, I described the main features ...