Table Of ContentTechnical
Analysis
Explained
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Technical
Analysis
Explained
The SucceSSful
InveSTor’S GuIde To
SpoTTInG InveSTmenT
TrendS and TurnInG poInTS
FiFth Edition
Martin J. Pring
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Contents
Preface ix
Part I: Trend-Determining Techniques
1. The Defnition and Interaction of Trends 3
2. Financial Markets and the Business Cycle 17
3. Dow Theory 29
4. Typical Parameters for Intermediate Trends 41
5. How to Identify Support and Resistance Zones 55
6. Trendlines 70
7. Basic Characteristics of Volume 97
8. Classic Price Patterns 115
9. Smaller Price Patterns and Gaps 166
10. One- and Two-Bar Price Patterns 186
11. Moving Averages 209
12. Envelopes and Bollinger Bands 233
13. Momentum I: Basic Principles 246
14. Momentum II: Individual Indicators 279
15. Momentum III: Individual Indicators 311
16. Candlestick Charting 340
17. Point and Figure Charting 373
18. Miscellaneous Techniques for Determining Trends 383
19. The Concept of Relative Strength 401
20. Putting the Indicators Together: The DJ Transports 1990–2001 423
vii
viii • Contents
Part II: Market Structure
21. Price: The Major Averages 431
22. Price: Sector Rotation 455
23. Time: Analyzing Secular Trends for Stocks,
Bonds, and Commodities 471
24. Time: Cycles and Seasonal Patterns 499
25. Practical Identifcation of Cycles 525
26. Volume II: Volume Indicators 531
27. Market Breadth 560
Part III: Other Aspects of Market Analysis
28. Indicators and Relationships That Measure Confdence 593
29. The Importance of Sentiment 610
30. Integrating Contrary Opinion and Technical Analysis 635
31. Why Interest Rates Affect the Stock Market 653
32. Using Technical Analysis to Select Individual Stocks 673
33. Technical Analysis of International Stock Markets 694
34. Automated Trading Systems 713
35. C heckpoints for Identifying Primary Stock
Market Peaks and Troughs 739
Epilogue 753
Appendix: The Elliott Wave 755
Glossary 761
Bibliography 767
Index 773
PReFACe
There is no reason why anyone cannot make a substantial amount of
money in the fnancial markets, but there are many reasons why many
people will not. As with most endeavors in life, the key to success is
knowledge and action. This book has been written in an attempt to shed
some light on the internal workings of the markets and to help expand the
knowledge component, leaving the action to the patience, discipline, and
objectivity of the individual investor.
The mid- to late-1980s saw the expansion of investment and trading
opportunities to a global scale in terms of both the cash and the futures
markets. In the 1990s, innovations in the communications industry enabled
anyone to plot data on an intraday basis for relatively little cost. Today,
numerous charting sites have sprung up on the Internet, so now virtually
anyone has the ability to practice technical analysis. Indeed, the technology
of teaching technical analysis has progressed since the frst edition of this
book in 1979. We pioneered the teaching of the subject in video format in
the mid-1980s, but I’ll venture to guess that technological progress and
the acceptance of new media formats will mean that e-book sales of this
edition will outstrip traditional sales of the physical book before it runs
its course. Already, the written word is in competition with audiovisual
presentations, such as my recently introduced online interactive technical
analysis video course at pring.com; others are sure to follow!
As a consequence of the technological revolution, time horizons have
been greatly shortened. I am not sure that this is a good thing because short-
term trends experience more random noise than longer-term ones. This
means that the technical indicators, while still the most effective tool, are not
generally as successful when applied to longer-term trends. The ffth edi-
tion of Technical Analysis Explained has been expanded and totally revised
to keep abreast of many of these changes, and to include some technical
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