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This page is intentionally blank. P r aise for 1 New Thinking in Te chnical A n a l y s i s 2 3 T r a d i n g M o d e l s f r o m t h e M a s t e r s 4 Edited by Rick Bensignor 5 6 7 “While single chapters can be read as an independent unit, when taken together 8 they form an excellent foundation of the most valued principles of technical 9 a n a l y s i s , as Bensignor gets this incredible group of experts to describe in detail how they 10 actually do what they do.” 11 Bridge Tr a d e r 12 13 “A straightforward, user- f r i e n d l y, application-rich presentation of market 14 dynamics forecasting, enhanced with more than 170 charts and illustrations.” 15 Technical Analysis of Stocks & Commodities 16 17 “It has been a long time, perhaps a generation, since technical analysis has no longer been 18 considered witchcraft or voodoo. But the evolving and changing nature of the market has 19 forced reconsideration of even the best tools. Rick Bensignor, an outstanding technician 20 himself, has brought together a superlative group of technicians and money man- 21 agers who rely on technical indicators. This book is a must for all investors and traders 22 who are interested in a technical approach to the market.” 23 A L F R E D H. K I N G O N 24 Former Assistant Secretary of the Treasury and Secretary of the Cabinet 25 and former research director and money manager 26 27 “An excellent mix of classic and new concepts in technical analysis. Investors, as 28 well as short-term traders, will find interesting and useful material in this book.” 29 G A I L M. D U D A C K , C M T 30 Managing Director and Chief Equity Strategist 31 UBS Wa r b u r g 32 33 “The recent support for technical trading rules among respected academics makes this 34 a must-read volume. ” 35 W I L L I A M L. S I L B E R , P H.D. 36 Professor of Finance and Economics 37 Stern School of Business, New York University www.rasabourse.com “Rick Bensignor has gathered together twelve of the top individuals in the field of technical 1 analysis. Their methods and vast experience will open your mind to new opportunities. ” 2 E D WA R D J. S O L A R I 3 Vice President and Senior Foreign Exchange Advisor 4 BMO Nesbitt Burns 5 6 “A compendium of methodologies from recognized practitioners in technical analysis, N e w 7 T h i n k i n g presents precise strategy platforms for today’s traders.” 8 L O U I S E YA M A D A 9 Managing Director and head of Technical Research 10 Salomon Smith Barney 11 12 “The increasing importance of technical analysis in the contemporary marketplace is dra- 13 matically highlighted by this new compendium from a dozen top technical analysts. Tr a d i- 14 tional techniques are presented side-by-side with current innovations, giving the reader 15 a broad view of technical analysis. ” 16 J O H N B O L L I N G E R, C FA, C M T 17 President and founder, Bollinger Capital 18 19 “New Thinking in Technical Analysis will someday be viewed as a classic because it 20 opens the eyes of veteran traders to new methods. Rick deserves a lot of credit for having 21 the foresight to put this book together. ” 22 B I L L A B R A M S 23 Former Specialist on the New York Stock Exchange 24 25 “Rick Bensignor has put together a significant new book filled with methodologies from 26 some of the best names in the trading business. ” 27 B E N N E T T M O S T E L 28 Senior Vice President 29 Prudential Securities 30 31 “Baseball legend Yogi Berra once commented, ‘You can observe a lot by just looking.’ Wi t h 32 New Thinking, Rick Bensignor has scored a home run in that the collaborative wisdom of 33 the assembled team offers a valuable insight for new entrants and market veterans alike.” 34 J A S O N P E R L 35 Associate Director and Technical Analyst 36 UBS Warburg (London) 37 www.rasabourse.com This page is intentionally blank. www.rasabourse.com 1 2 3 4 5 6 7 8 9 New Thinking 10 11 in 12 13 14 Te c h n i c a l 15 16 17 A n a l y s i s 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 www.rasabourse.com Also available from BLOOMBERG PRESS New Insights on Covered Call Writing: The Powerful Technique That Enhances Return and Lowers Risk in Stock Investing by Richard Lehman and Lawrence G. McMillan Tom Dorsey’s Trading Tips: A Playbook for Stock Market Success by Thomas J. Dorsey and the DWA Analysts Wall Street Secrets for Tax-Efficient Investing: From Tax Pain to Investment Gain by Robert N. Gordon with Jan M. Rosen Investing in Hedge Funds: Strategies for the New Marketplace by Joseph G. Nicholas Market-Neutral Investing: Long/Short Hedge Fund Strategies by Joseph G. Nicholas A complete list of our titles is available at www.bloomberg.com/books Attention Corporations This book is available for bulk purchase at special discount. Special editions or chapter reprints can also be customized to specifications. For information, please e-mail Bloomberg Press, [email protected], Attention: Director of Special Markets, or phone 212-617-7966. www.rasabourse.com BLOOMBERG PROFESSIONAL LIBRARY 1 2 3 4 5 6 7 New Thinking 8 9 in 10 11 12 Technical 13 14 15 Analysis 16 17 18 19 20 T RADING MODELS FROM 21 THE MASTERS 22 23 24 25 26 27 Edited by 28 Rick Bensignor 29 30 31 32 33 34 35 BLOOMBERG PRESS 36 NEW YORK 37 www.rasabourse.com © 2000 by Bloomberg Press. All rights reserved. Protected under the Berne Convention. Printed in the United States of America. No part of this book may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher except in the case of brief quotations embodied in critical articles and reviews. For information, please write: Permissions Department, Bloomberg Press, 731 Lexington Avenue, New York, NY 10022, U.S.A. or send an e-mail to [email protected]. BLOOMBERG, BLOOMBERG LEGAL, BLOOMBERG MARKETS, BLOOMBERG NEWS, BLOOMBERG PRESS, BLOOMBERG PROFESSIONAL, BLOOMBERG RADIO, BLOOMBERG TELEVISION, BLOOMBERG TERMINAL, BLOOMBERG TRADEBOOK, and BLOOMBERG WEALTH MANAGER are trademarks and service marks of Bloomberg L.P. All rights reserved. TD Range Expansion IndexTM (TD REITM), TD DeMarker ITM, and TD DeMarker IITM are registered trademarks of Market Studies Inc. and cannot be copied or reproduced without the express written approval of Market Studies Inc. All rights reserved. This publication contains the authors’ opinions and is designed to provide accurate and authoritative information. It is sold with the understanding that the authors, publisher, and Bloomberg L.P. are not engaged in rendering legal, accounting, investment-planning, or other professional advice. The reader should seek the services of a qualified professional for such advice; the authors, publisher, and Bloomberg L.P. cannot be held responsible for any loss incurred as a result of specific investments or planning decisions made by the reader. First edition published 2000 9 10 Bensignor, Rick, editor New thinking in technical analysis: trading models from the masters /edited by Rick Bensignor; contributing authors, Linda Bradford Raschke . [et al.]. p. cm. — (Bloomberg professional library) Includes index. ISBN 1-57660-049-1 (alk. paper) 1. Investment analysis. I. Bensignor, Rick. II. Bradford Raschke, Linda. III. Series HG4529.N49 2000 332.6—dc21 00-057179 CIP Book Design by LAURIE LOHNE /DESIGN IT COMMUNICATIONS www.rasabourse.com 1 2 3 4 5 6 7 Fifty years ago most investors suffered from a lack of useful information and 8 approached the stock market with a certain fear because of it. Today the investment 9 environment is overloaded with information, and a major problem facing investors 10 is sifting the useful from the useless. Another issue is that good companies aren’t 11 always good stocks and bad companies sometimes are profitable investments. Time 12 is limited and we are all searching for a way to understand complex material 13 quickly and draw conclusions from it. 14 Over the years I have found technical analysis helpful to me both as an investor 15 and as a strategist. It enables me to grasp the psychological factors that are so 16 important in determining the market’s or a stock’s performance. Rick Bensignor 17 has assembled an impressive group of expert practitioners whose chapters will help 18 both the layman and the professional understand the origins, development, and 19 current applications for technical analysis. It is not sorcery; it is a valuable craft. 20 If you apply the lessons well, technical tools will help you make more money in the 21 stock market in good times and limit your losses when times get rough. 22 23 24 25 B Y R O N R. W I E N 26 Chief U.S.