W.D. Gann's natal chart for coffee.
In
big upswings a reaction will often not last over two months, the third
month being up, the same rule as in yearly cycle –2 down and the third
up.
In
extreme markets, a reaction sometimes only lasts 2 or 3 weeks; then the
advance is resumed. In this way a market may continue up for 12 months
without breaking a monthly bottom.
In a bull market, the minor trend may reverse and run down 3 to 4 months; then turned up and follow the main trend again.
In
a bear market, the minor trend may run up to 3 to 4 months, then
reverse and follow the main trend, although, as a general rule, stocks
never rally more than 2 months in a bear market; then start to break in
the 3rd month and follow the main trend down.
» When a stock sells on the 180th day, week or month, it is on the degree of its time angle. « W.D. Gann, November 1935.
WEEKLY MOVES
The weekly movement gives the next important minor change in trend, which may turn out to be a major change in trend.
In a bull market, a stock will often run down 2 to 3 weeks, and possibly 4, then reverse and follow the main trend again. As a rule, the trend will turn up in the middle of the third week and close higher at the end of the third week, the stock only moving 3 weeks against the main trend. In some cases, the change in trend will not occur until the fourth week; then the reversal will come and the stock close higher at the end of the fourth week. Reverse this rule in a bear market.
In rapid markets with big volume, a move will often run 6 to 7 weeks before a minor reversal in trend, and in some cases, like 1929, these fast moves last 13 to 15 weeks or 1/4 of a year. These are culmination moves up or down.
As there are 7 days in a week and seven times seven equals 49 days or 7 weeks, this often marks an important turning point. Therefore, you should watch for top or bottom around the 49th to 52nd day, although at times a change will start on the 42nd to 45th day, because a period of 45 days is 1/8 of a year. Also watch for culminations at the end of 90 to 98 days.
After a market has declined 7 weeks, it may have 2 or 3 short weeks on the side and then turn up, which agrees with the monthly rule for a change in the third month.
Always watch the annual trend of a stock and consider whether it is in a bull or bear year. In a bull year, with the monthly chart showing up, there are many times that a stock will react 2 or 3 weeks, then rest 3 or 4 weeks, and then go into new territory and advance 6 to 7 weeks more.
After a stock makes top and reacts 2 to 3 weeks, it may then have a rally of 2 to 3 weeks without getting above the first top; then hold in a trading range for several weeks without crossing the highest top or breaking the lowest week of that range. In cases of this kind, you can buy near the low point or sell near the high point of that range and protect with a stop loss order 1 to 3 points away. However, a better plan would be to wait until the stock shows a definite trend before buying or selling; then buy the stock when it crosses the highest point or sell when it breaks the lowest point of that trading range.
DAILY MOVES
The daily movement gives the first minor change and conforms to the same rules as the weekly and monthly cycles, although it is only a minor part of them.
In
fast markets, and there will only be a 2-day move in the opposite
direction to the main trend and on the third day the upward or downward
course will be resumed in harmony with the main trend.
A
daily movement may reverse trend and only run 7 to 10 days; then follow
the main trend again. During a month, natural changes in trend occur
around
6th to 7th 14th to 15th 23rd to 24th
9th to 10th 19th to 20th 29th to 31st
These minor moves occur in accordance with tops and bottoms of individual stocks.
It is very important to watch for a change in trend 30 days from the last top or bottom. Then watch for changes 60, 90, 120 days from tops or bottoms. 180 days or six months –very important and sometimes marks changes for greater moves. Also around the 270th and 330th day from important tops or bottoms, you should watch for important minor and often major changes.
JANUARY 2nd to 7th AND 15th to 21st
Watch these periods each year and note the high and low prices made. Until these high prices are crossed or low prices broken, consider the trend up or down.
Many times when stocks make low in the early part of January, this low will not be broken until the following July or August, and sometimes not during the entire year. This same rule applies in bear markets or when the main trend is down. High prices made in the early part of January are often high for the entire year and are not crossed until after July or August.
For example: U. S. Steel on January 2, 1930, made a low at 166, which was the half-way point from 1921 to 1929, and again on January 7, 1930 declined to 167¼. When this level was broken, Steel indicated lower prices.
JULY 3rd to 7th AND 20th to 27th
The month of July, like January, is a month when most dividends are paid and investors usually buy stocks around the early part of the month. Watch these periods in July for tops or bottoms and the change in trend. Go back over the charts and see how many times changes have taken place in July, 180 days from January tops or bottoms. For example: July 8, 1932 was low; July 17, 1933, high; and July 26, 1934 low of the market.
See also:
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