股票期货突破技术分析(英文原版)-第14章

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n　a　row　is　considered　extremely　significant　（see　Figure　4。38）。　

Three　Methods　
The　legends。of　Munehisa　Homma　（and　there　are　many）　say　that　he　had　a　third　method　he　emphasized　in　addition　to　selling　and　buying：　resting。　If　the　market　is。trading　in　a　narrow　range；　frequent　buying　and　selling　is。unlikely　to　increase　earnings。　The　more　often　you　trade；　the　higher　your　costs。（in　the　form　of　trading　missions）　and　the　more　likely　you　will　take　a　loss。　It's。important　at　these　times　to　rest—and　knowing　when　to　time　your　rests。is。just　as。important　as　knowing　when　to　time　your　buying　and　selling。　
The　three　methods。pattern　shown　in　Figure　4。39　is。the　candlestickbination　that　tells。you　to　rest。　Three　methods　is。also　referred　to　as　three　rules。and　refers。to　the　three　choices。of　selling；　buying；　or　resting。　
In　the　top　pattern　of　Figure　4。39；　an　uptrend　has。produced　a　large　white　candlestick。followed　by　harami　patterns。（either　white　or　black）。　There　is。then　the　large　white　marubozu　that　exceeds。the　previous。high　to　form　a　classic。breakout　from　a　holding　pattern。　The　small　harami　patterns。indicate　a　break。in　the　action。　The　bottom　of　the　large　white　candlestick。has。bee　a　support　line　and　the　top　a　resistance　line。　Having　broken　through　the　resistance　line；　the　pattern　appears。very　bullish；　but　the　important　thing　according　to　the　three　methods。is。to　forgo　either　buying　or　selling　until　the　price　breaks。out。　The　same　is　true　of　the　inverse　pattern。　The　bottom　pattern　in　Figure　4。39　occurs。in　a　downtrend　and　appears。to　be　bearish；　but　you　refrain　from　trading　until　the　downward　break。　

Over　a　century　has。passed　since　candlesticks。took。their　present　form。　The　fact　that　traders。still　use　techniques。that　were　pioneered　in　the　Dojima　rice　markets　is。a　testament　to　their　value　in　illustrating　the　dynamic。movements。of　price。　While　many　technical　indicators。have　been　developed　to　measure　trends；　gauge　momentum；　and　identify　price　targets；　candlesticks。serve　as。the　foundation　to　which　other　techniques。are　applied。　With　a　solid　understanding　of　candle　patterns；　you　will　find　that　you　are　able　to　use　conventional　indicators。with　more　precision　and　confidence。　From　Munehisa　Homma's。handmade　candle　charts。to　the　sophisticated　charting　software　we　now　enjoy；　candlesticksntinue　to　jump　off　the　screen　and　let　traders。truly　feel　the　rhythm　of　the　markets。　


CHAPTER。5　



Price　and　Time　

CONSTANCE　BROWN　
Price　projection　accuracy　is。possible　when　the　concept　of　confluence　is　clearly。understood。　Confluence　is。a　precise　target　zone　derived　from　multiple　price　projections　utilizing　the　natural　expansion　and　contraction　of　price　movement　found　in　all　markets。and　time　horizons。　The　results。form　a　mathematical　grid　that　allows。precise　entry　and　exit　strategies。prior　to　any　trade；　with　measurable　risk…reward　ratios。　The　concept　of　price　confluence　is。then　developed　further　to　study　confluence　targets。on　the　diagonal　and　vertical　axes。to　determine　time　projections。as。developed　by　W。D；　Gann。　Gann　accurately。timed　the　start；　magnitude；　and　duration　of　the　crash　of　1929。　
Oil　will　be　key　to　global　equity　indexes。into　the　year　2012。　These　global　equity　indexes。are　being　set　up　right　now；　allowing　us。to　use　the　current　market　data　in　November　2006　to　consider　the　implications。before　us。　
Fibonacci　Price　Targets　
To　determine　support　or　resistance　price　levels；　many　favor　the　use　of　Fibonacci　retracements。　But　this　method　of　subdividing　a　range　is。not　used　to　its。full　potential。　Basic。applications。simply　define　a　market　swing　and　subdivide　the　range　between　a　selected　price　high　and　a　price　low　into　the　ratios。0。618；　0。50；　and　0。382。　Unfortunately；　this。method　overlooks。the　fact　that　markets。have　a　natural　expansion　and　contraction　cycle。　To　traders；　this。means。their　Fibonacci　targets。will　work。in　markets。producing　equality。swings。only；　however；　they　will　fail　when　the　market　is。expanding　or　contracting　relative　to　the　range　first　selected。　
When　a　contraction　cycle　influences。a　rally　or　a　decline；　the　Fibonacci　targets。derived　from　a　major　price　high　and　low　will　be　exceeded。　In　a　contracting　cycle；　traders。are　stopped　out　by　entering　the　market　too　early；　only　to　see　the　market　reverse　and　take　off　without　them。　In　an　expansion　cycle；　the　trader's。entry　level　is。never　achieved。　The　market　reverses；　forcing　a　chase　that　increases。the　capital　risk。and　pels。the　trader　to　establish　a　smaller　position　as。the　opportunity　slips。away。　For　this。reason　many　abandon　the　use　of　Fibonacci　ratios；　they　feel　they　work。only　some　of　the　time。　In　essence；　they　are　right。　But　Fibonacci　retracements。are　not　the　problem；　it's。their　application　that　needs。to　be　changed。　
Figure　5。1　displays。the　current　monthly　continuous。futuresntract　for　crude　oil。　The　monthly　chart　shows。the　recent　market　decline　into　November　of　2006　and　raises。the　first　question：　how　far　will　this。decline　carry　the　market？　Although　sharp；　this。is。a　correction　only。if　the　scenario　into　2012　isrrect。　This。is。the　important　pullback。for　the　long…term　horizon；　therefore；　we　need　precise　targets。to　monitor。　This　can　be　done　using　multiple　Fibonacci　retracements。　
When　defining　support　for　a　correction　in　a　rallying　market；　always　start　at　the　top　and　only。then　select　a　low。　The　first　point　selected　should　be　zero。　The　first　calculation　within　the　range　below　zero　should　be　a　value　of　38。2　percent；　followed　by　50　percent　and　61。8　percent。　The　price　low　selected　at　the　bottom　of　the　range　is。100　percent。　Bloomberg　does。these　calculations　correctly；　but　TradeStation　defines　the　first　point　selected　as　100　and　reverses。the　order。　Recognizing　a　38。2　percent　and　61。8　percent　ratio　will　fall　on　the　same　price　levels。within　the　range；　it　bees。understandable　why　different　quote　vendors。have　different　opinions。about　how　this。should　be　programmed。　However；　most　vendors。force　the　user　to　remain　generic　and　take　away　the　user's。ability　to　use　the　geometric。proportions。that　develop　within　the　market's。data　swings。　Study　the　charts。in　this。chapter　and　pare　the　steps。to　your　vendor's。tools；　and　it　will　bee　clear　whether　the　vendor　is。backward。　TradeStation　doesrrect　its。logic。in　the　Fibonacci　expansion　tool。　CQC　will　draw　its　Fibonacci　levels。backward；　away　from　the　newest　data　in　your　chart。　Setting　the　default　to　extend　the　lines　across　the　entire　screen　will　fix　this。　

You　may　find　some　vendors。have　a　default　value　of　75　percent。　Turn　this。off；　as。well　as。any　other　range　offered　as　a　default。　Just　use　the　primary　three　listed。　It　doesn't　matter　whether　you　add；　subtract；　multiply；　or　divide　a　Fibonacci　value；　because　it　will　always。product　another　Fibonacci　ratio。　Therefore；　we　will。calculate　the　other　ratios。by　using　multiple　ranges。　You'll　see　how　this。bees。important　in　Figure　5。4。　
In　Figure　5。1；　the　same　price　high　is。used　for　two　different　Fibonacci　retracement　calculations　from　different　ranges。　The　lows。selected　are　internal　pivot　points。within　the　larger　swing。　Each　is。selected　for　a　reason。　Look。for　reversals。that　develop　directional　signals。such　as。key　reversals；　gaps；　and　secondary　retracements。that　begin　strong　swings。within　the　larger　trend。　These　internal　milestones。are　markers；　revealing　the　price　levels。the　market　is。using　to　build　future　price　swings。　There　are　discernable　mathematical　relationships。between　one　key　market　pivot　and　another　that　tie　the　pivots。together　within　all　time　horizons。　
The　important　price　levels。can　be　identified　by　starting　at　the　〃top〃　and　then　examining　each　pivot　price　low　as。a　possible　new　range。　In　Figure　5。1；　bold　lines。clarify　the　start；　end；　and　resulting　subdivisions。within　the　range。　The　01。8　ratio　bisects　50。　It　is　highlighted　with　an　arrow。　With　just　one　Fibonacci　grid　in　place；　it's。impossible　to　know　whether　the　levels。within　the　subdivided　range　are　major　or　minor　support。　
Starting　from　the　same　high；　a　second　low　is。selected；　just　under　30。　The　resulting　subdivided　range　produces。a　50　percent　retracement　near　50；　which　overlaps。the　01。8　percent　retracement　from　subdividing　the　first　range。　These　different　Fibonacci　ratios。that　overlap　form　a　（（influence　target；　which　is。major　support。　
If　this　chart　were　inverted　to　represent　a　market　in　a　downtrend；　producing　a　sharp　upward　retracement；　the　calculations。for　resistance　would　always。be　started　at　the　bottom；　and　then　price　highs。would　be　selected。　Starling　retracements　in　this。manner　allows。the　internal　swings。to　be　examined。　If　you　start　in　reverse；　you　are　always。forced　to　go　straight　to　the　market　extreme　top　or　major　bottom；　and　the　internal　dynamics。of　the　data　would　never　be　considered。　

Price　Projection　Using　Geometric　Proportion　
The　monthly　chart　for　crude　oil　futures。in　Figure　5。2　includes。a　third　range　to　the　price　low；　at　the　bottom　of　wave　2。　The　confluence　zones。that　form　define　major　support　for　this　current　decline　at　56；　50；　and　44。　However；　an　important　change　was　made　in　Figure　
5。2。　All　the　Fibonacci　ranges。start　from　a　price　high　that　truncates　the　spikes。into　the　double　top。　That's　done　to　clearly　illustrate　that　the　same　starting　point　is。always。used　for　each　range　selected；　but　the　price　high　itself　is。not　always　the　best　place　to　start。　Sometimes　it　makes。sense　to　truncate　spikes。when　the　majority　of　closing　periods。fail　to　record　a　close　within　the　range　of　the　spike。　To　simplify　the　chart；　add　a　horizontal　line　at　the　continence　zones。to　mark。major　support　targets。　The　targets。in　Figure　5。2　are　near　56；　50；　and　44。　In　practice；　it　is。important　to　be　aware　of　the　width　of　the　confluence　zone　and　not　just　a　single　value　within　the　target　range。　
A　14…period　relative　strength　index　（RSI）　indicator。was。added　to　the　bottom　of　Figure　
5。2。　An　oscillator　can　confirm　the　key　pivots。　In　this。chart　the　14…period　RSI　has。two　moving　averages。　The　averages。are　calculated　from　the　RSI；　not　from　price。　Moving　averages。serve　as。support　and　resistance　levels。for　the　indicator。　Points。P　and　Q　mark。two　momentum　extreme　lows。　Notice　the　character　of　these　momentum　lows。　Both　form　a　W　pattern　before　the　market　successfully。engages。in　a　strong　advance。　Past　character　is。nearly　always　repeated　in　the　time　frame　being　studied。　So　we　know　two　things。from　reading　points　P　and　
Q：　First；　this。market　likes。to　produce　a　plex　W；　so　we　need　not　take　the　reversal　seriously　until　it　does。　Second；　the　market　does。not　have　such　a　pattern　in　place　now。　It　can　further　be　said　this。market　may　be　oversold；　but　it　has。not　defined　a　final　bottom。　Because　the　market　is。at　56；　the　confluence　zone　under　the　market　bees。the　more　likely　target　at　50。　An　extension　would　allow　a　move　to　44；　but　just　under　this。zone　bees。the　precise　area　at　which　the　market　should　not　trade　if　the　opinion　is　correct　that　this。market　will　make　a　full　retracement　back。to　the　highs。　Knowing　where　the　market　should　not　go　gives。us。a　clearly　defined　risk…reward　ratio。　It　also　clearly　defines。a　level　at　which　the　implications。for　global　rates。and　equitiesuld　change。　For　this　reason；　the　decline　is。setting　up　the　long…term　picture　in　financial　markets。　

The　confluence　zone　defining　a　price　target　at　50　is。of　particular　interest。　If　you　find　the　Elliott　Wave　Principle　a　challenge；　this。approach　will　be　invaluable　to　you。　Notice　the　swing　lo