INDEX Page numbers followed by n indicate note numbers. A Arnott, Robert, 391 Ascending triangle pattern, 140–141 AB model. See Abreu-Brunnermeier model Asks (offers), 8 Abreu-Brunnermeier (AB) model, 481–482 Aspray, Thomas, 223 Absolute breadth index, 327–328 ATM. See Automated teller machine Absolute difference, 327–328 ATR. See Average trading range; Average Accelerated trend lines, 65–66 true range Acceleration factor, 88, 89 At-the-money, 418 Accumulation, 213 Average range, 79–80 ACD method, 186 Average trading range (ATR), 113 Achelis, Steven B., 214n1 Average true range (ATR), 79–80 Active month:, 401 Ayers-Hughes double negative divergence AD. See Chaikin Accumulation Distribution analysis, 11 Adaptive markets hypothesis, 12, 503 Ayres, Leonard P. (Colonel), 319–320 implications of, 504 ADRs. See American depository receipts ADSs. See American depository shares B 629 Advance, 316 Bachelier, Louis, 493 Advance-decline methods Bailout, 159 advance-decline line moving average, 322 Baltic Dry Index (BDI), 386 to its 32-week simple moving average, Bands, 118–121 322–324 trading strategies and, 120–121, 216, 557 one-day change in, 322 Bandwidth indicator, 121 ratio, 328–329 Bar chart patterns, 125–157. See also Patterns that no longer are profitable, 322 behavioral finance and pattern recognition, ADX. See Directional Movement Index 129–130 Alexander, Sidney, 494 classic, 134–149, 156 Alexander’s filter technique, 494–495 computers and pattern recognition, 130–131 American Association of Individual Investors learning objective statements, 125 (AAII)., 519–524 long-term, 155–156 American depository receipts (ADRs) 317 market structure and pattern recognition, 131 American FinanceCOPYRIGHTED Association, 479, 493 MATERIALoverview, 125–126 Amplitude, 348 pattern description, 126–128 Analysis profitability of, 133–134 description of, 300 Bar charts, 38–39 fundamental, 473 examples of, 38–39 Andrews, Dr. Alan Baruch, Bernard, 575 pitchfork, 72, 73 BAs. See Bankers’ acceptances Apex, 139, 181 Base, 139 Appel, Gerald, 227 Base currency, 413–414 Arithmetic moving average, 100 Bearish resistance lines, 70–71, 249, 256 Arithmetic scale, 42 Bear markets, 20 Arms, Richard W., Jr., 206, 331 cyclical, 568 Arms Index, 331–332 trade setups, 304 Behavioral finance, 502–503 failure of, 128 contrary opinion and, 590–592 false and premature, 136 financial news and, 473 learning objective statements, 75 folklore of Wall Street traders, 470–472 level of, 76 forerunners to, 469–473 overview, 75, 76 human nature and, 582–583 risk/return ratio for, 95–96 learning objective statements, 469 specialist, 91, 92 overview, 469–470 stops and, 90 pattern recognition and, 129–130 stops for false breakout, 91 value investing and, 472–473 using price to set price targets, 134 Benchmarks volatility of, 79–80 detrending market data, 563–564 Breakout trading, 62 use in rule evaluation, 559–565 Broadening pattern, 143–146 Beta, 79, 465 Broad ranging days, 269 description of, 467 Bubbles, 453–454, 482 Biggs, Barton, 574 models of, 479n6 Binary rules Buffett, Warren, 572, 589 from multiple thresholds, 556–558 Bullish support lines, 70, 249, 256 thresholds and, 555–556 Bull markets, 20 BIS. See Bank for International Settlements trade setups, 304 Black, Fischer, 479–481, 493 Busted rectangles, 137 Bloomberg Barclays U.S. Aggregate Bond Index, Buy signals, 256 387 compound point-and-figure, 256, 257 630 Bogle, John, 576 Bollinger, John bands, 118, 119, 216, 557 C INDEX Bonds, 386–387, 391 Cadbury, Chris, 580–582 debt securities, 391 Calahan, Edward, 30 fixed income securities, 391 Call option:, 418, 426–428 issuers of, 392–393 Candlestick charts, 40–41, 242–251 Bounded, 202 advantages of, 243 Bounded/unbounded, 323 basic market strategies, 247–251 Bowles, Samuel, 15 charting instructions, 245–247 “Bowl” pattern, 149–151 constructing, 246 “Box” pattern, 135–136 example of, 41 Box range, 251 learning objective statements, 242 Box size origination of, 243 based on a fixed percentage of price, 274–275 overview, 242–244 based on a multiple of the average true range, real body of, 40 275–276 shadows, 40 examples of, 261, 262, 263 wick, 40 in point-and-figure charting, 259–263 Candlestick patterns, 187–198 variable, 274–277 one- and two-bar, 189–194 Breadth indicator, 316, 606–607 results from, 197–198 characteristics of, 320 Candlevolume charts, 208 Breakaway gaps, 163 Capital asset pricing model (CAPM), Breakouts, 60, 76–83 463–468 anticipation of, 82–83 as an accepted theory, 467–468 buy signal, 119, 120 equation, 464–465 confirmation of, 76–82 interpretation of, 465–467 bindex 630 November 16, 2018 5:55 PM CAPM. See Capital asset pricing model CMT Association, 474 Case studies about, ix of gaps and classic patterns, 167–169 curriculum, xiii of successful investors, 578–582 exam topics and question weightings, CBOE NASDAQ-100 volatility index xvi–xvii as economic indicator, 606 level I content selections, xiii CBOE volatility index. See Volatility index level I exam, xv CCI. See Commodity Channel Index program, xi CDs. See Certificates of deposit “Coil” pattern, 141–142 Central tendency, 531–532 Commitments of traders (COT), 402 CFE. See CBOE Futures Exchange Commodities Research Bureau (CRB), 317, CFTC. See Commodity Futures Trading 385, 609 Commission Commodity Channel Index (CCI), 235–236 Chaikin, Marc, 213 Commodity Futures Trading Commission Chaikin Accumulation Distribution (AD), 213 (CFTC), 222, 510 Chaikin Money Flow, 215 Commodity Price Index, 609 Chaikin oscillator, 216 Composite chart, 361 “Chandelier Exit,” 87 Composite model, 610–611 Chang, Kevin, 476 Computers. See also Software Change of polarity principle, 251 pattern recognition and, 130–131 Channels, 61, 68–69, 121–122 Confirmation, 200–241 description of, 147 analysis methods, 201–204 Donchian, 121, 122 classic patterns, 204 Charles H. Dow Award, 333 concept of, 22–23 631 Charting crossovers, 204 INDEX point-and-figure charting, 252–277 divergences, 203 of stock prices, 473–474 examples of, 24 Charts failure swings, 202 benefits of, 28–29 learning objective statements, 200 candlevolume, 208 open interest, 221–224 computer programs for, 31 overbought/oversold, 202 data construction and, 32–34 overview, 200–201 description of, 27–28 price confirmation, 224–239 development and analysis of, 1 reversals, 203 “Equivolume,” 206–208 trend ID, 203–204 example of prices, 31 volume confirmation, 205–221 history and construction of, 27–44 Congestion area, 53. See also Trends history of charting, 29–32 Connors, Larry, 182–183, 184 learning objective statements, 27 Consolidation, 53. See also Trends overview, 27–29 Consumer Price Index (CPI), 357 scale for, 42–44 as economic indicator, 603 types of, 34–41 versus S&P 500 Index, 574 Chicago Board of Trade, 254Chicago Mercantile Continuous contract, 33–34, 401 Exchange, 254, 575 Contracts Citigroup, 33 expiration date of, 432 Classic patterns, 204 linked, 33–34 Climax pattern, 146–149, 16, 172 Contrary opinion, 590–592. See also Consensus Close filter, 76–78 and commitment indicators Closing price, 161 Convergence, 224–225 Cluster, 160, 296–298 Convertible bonds, 379 bindex 631 November 16, 2018 5:55 PM Cootner, Paul, 628 Directional Movement Index (ADX), 300 Coppock, Edwin “Sedge,” 340 line, 115–116, 236–239 Coppock curve, 340–341 Directional movement indicator (DMI), 108 Corrective waves, 287–292 Directional trends, 62–70 combination, 292 description of, 62–63 flat, 289 uptrends, 63–68 triangle, 289–292 Divergences, 203, 224–225 zigzag, 288 description of, 315 Countertrends double, 321 identifying, 301 double negative, 319–322 Cowles, Alfred III, 16 negative, 315 C P. See Commercial paper positive, 315 CPI. See Consumer Price Index ranks, 618–619, 624–627 Crabel, Toby, 174, 176–177, 183 DJIA. See Dow Jones Industrial Average Cradle, 139 DJTA. See Dow Jones Transportation Average CRB. See Commodities Research Bureau DMI. See Directional movement indicator Crossings, 605–608 Dodd, David, 472 “Cross-Section” paper, 467 DOE. See Department of Energy “Cup” pattern, 149–151 Doji pattern, 189 Cryptocurrencies, 415–416 Doji star, 194 Cycle analysis Donchian, Richard, 121 Cycle harmonics, 349 breakout method, 62 Cycle theory, 347–356 channel, 122 632 definition, 348 Dormier, Buff, 220 types, 347 Double divergences, 321 Cyclicality, 349 Double top and double bottom pattern, INDEX 134–135 Dow, Charles H., 10, 11, 15, 200, 252 D Dow Jones Industrial Average (DJIA), 3–4, 10, Daily price ratio, 564–565 317, 329, 586–587 Dark cloud cover pattern, 193–194 gaps and, 162 Data filters, 375 Dow Jones Transportation Average (DJTA), Davis, Robert E., 256, 258 586–587 Davis’ Law, 586 Downs, Walter, 181–182 DCB. See Dead cat bounce pattern Downtrend, 5–6 Dead cat bounce (DCB) pattern, 169–171, 220 Dow theory, 15–26. See also Trends Decelerated trend lines, 66 confirmation concept, 22–23 Decline, 316 criticisms of, 25 DeMark, Tom, 82, 55 ideal market picture, 18 Derivatives, 131 learning objective statements, 15 Descending triangle pattern, 139–140 minor trend, 21–22 Desmond, Paul F., 333 overview, 15–18 DeVillers, Victor, 252–253 primary trend, 20 Diamond top pattern, 144–146 secondary trend, 21 trading, 146 theorems, 18–25 DIffusion indicator, 567n8 trends in price motion, 19–20 Directional movement, 113–116, 557–558 trend types, 20–25 constructing indicators for, 113 volume importance, 23–25 description of, 113 Drop-off effect, 228–229 using indicators for, 114–116 Druckenmiller, Stan, 574 bindex 632 November 16, 2018 5:55 PM E Equivolume, 206–208 “Equivolume” charts, 206–208 Ease