Pring Intro to TA Crib notes /Homage to Pring

Discussion in 'Technical Analysis' started by Mr. DNA, Oct 26, 2002.

  1. Mr. DNA

    Mr. DNA

    This post contains study notes transcribed from Martin Pring's iNTRODUCTION TO TECHNICAL ANALYSIS. iT DOES NOT REPRESENT THE WORK OF mR. dna AND IS MEANT FOR STUDY PURPOSES ONLY. I have changes some of the wording to try to make it easier for me to understand. Also find some of my own junk phrases.

    This is intended as a gesture of respect to Martin Pring.

    If any readers are familiar with this of Pring's books please comment.

    I use each of these phrases and paragraphs as "Flash Cards" throughout the day.

    Technical Analysis Notes and Understanding


    Bull trends have a tendency to be longer than bear trends

    When using trendlines to chart peaks and troughs, be aware of the half-signal.

    Half signal in a bull trend = Series of rising peaks remains intact but the series of rising troughs does not.

    When you see this wait for a failed rally and call the turn when both the series of peaks and the series of troughs has been reversed.

    The significance of the reversal is determined by the time span of the trend they are reflecting.

    Bull and Bear market rallys usually have 5 waves.

    Remember: Short term trends that go against the main trend are often subject to false or misleading signals.


    Edawards and Magee definitions:

    Support: buying, actuall or potential, sufficient in volume to halt a downtrend in prices for an appreciable period.

    Resistance: Selling, actual or potential sufficient in volume to satisfy all bids and hence stop prices from going higher for a time.

    Visualize this:

    At whatever price a stock trades, there will always be the same amount bought as is sold, It is the relative enthusiasm of either buyers or sellers that determines the price level.

    A price point or line which is first seen as support or resistance will become the other when the trend is reversed.

    An important rule:

    Once a support zone has veen violated, it reverses its role to resistance when prices start to rally again. This is because people bought at a certain price point and watched the price of their stock fall. When it rallied back to the point at which they bought, they see their opportunity to break even and sell. Only when this temporary concentration of supply is overcome can the price begin to rally beyond this point.

    Rules for assigning value to support and resistance levels.

    1. The more of a security that changes hands at a particular level, the more significant that level is likely to be as a support or resistance zone. * [Whenever you have alarge number of people buying or selling stock at a particular level they tend to remember their experiences.]

    2. The greater the speed of the preceding price movement, the more significant a support or resistance zone is likely to be.

    As in: The stock has just run a fast race and is now trying to lift aheavy weight. It cannot because it is now tired.

    3. The more powerful the move preceding the support or resistance zone, the greater its potential as a barrier.

    An area of resistance, for example will quickly fall if the previous move is associated with a huge expansion of volume and momentum. If there is a lot of power behind a move, the support or resistance zone is much more likely to fall on the first attempt.

    4. The most important rule:

    The more times a support or resistance zone has been able to reverse a price trend in the past, the greater its significance is likely to be.

    5. The longer the period that has elapsed between the time a support or resistance zone was last challenged, the less significance it is likely to have.


    A support or resistance zone can act as a temporary turning point for prices. It does not give any indication of how long or how large the new trend will be.


    Price Patterns:


    Rectangles most clearly demonstrate the temporary balance between buyers and sellers in transition periods.

    REVERSAL RECTANGLE: Marks the dividing line between the rising and falling trend.

    CONTINUATION OR CONSOLODATION RECTANGLE: indicates a consolidation of gains before the prices work their way higher.

    Both represent a battle between buyers and sellers.

    Q: can they be identified before the breakout occurs?

    A: It should be assumed that the breakout will occur in the direction of the prevailing trend - providing no strong evidence to the contrary is provided by the other indicators.

    Patterns that separate rising from falling trends are known as distribution patterns or tops.

    Patterns that separate falling from rising patterns are called accumulation patterns or bottoms.

    Distribution implies the transferof a security from strong, knowlegeable holders to weak or uninformed ones.

    On the other hand, accumulation occurs when the security is being transferred from weak unimformed owners to more savvy market participants

    Note formations of rectangle bases and rectangle tops.
    ============================================Four Basic principles of pattern interpretation.

    It is crucial to recognize the type of trend being reversed.

    Technical Analysis is concerned with identifying trends at an early stage, but few aspects of this art form provide us with any pointers as to the extent of the expected move


    To calculate the "MEASURING OBJECTIVE"

    Measuring objectives are ultimate minimum objectives.

    The price objective is not always achieved in one move.

    Measuring objectives indicate not only magnitude, but how long a move may continue once a trend has reversed.

    Multiples of the objective are used as straight price objectives
    Multiples of the objective also serve as key pivot points.

    Retracement may find support at the distance of the minimum objective.

    Measure the maximum depth of the formation [rectangle or other] and project this distance from the beakout point.

    Breakouts toward the measuring objective are often followed by retracement moves. which take the price either toward the pattern or to its outer extremity.


    Linear [Arithmetic] Scaling - Each vertical distance represents the same amount of price change

    Ratio [Semilog(rithmic)] Scaling - Each vertical segment of the same size represents a doubling in price


    It doesn't matter which one is used in short term charts. The price change is not that great.

    In longer term charts, scaling is critical. That's why pring prefers ratio [or "log" in esignal]

    Pring says " Market prices are a function of psychological attitudes toward the emerging fundamentals, Sinces these moods have a tendency to move proportionately, it makes sense to plot them proportionately.



    It is normal for volume to increase along with prices and to decrease as prices decline.

    Volume is always relative to the recent past.

    Volume going with the trend tells us that the prevailing trend is healthy.

    It is when volume moves against the trend that a warning sign is given.

    In rising markets it is mormal for volume to peak in the early to middle stages of a price pattern develpoment.

    A breakout that occurs with small volume is suspect.

    you need enthusiasm [volume] for a meaningful rally.