2-D AY C HART M OVES T IME T URNS
2-DAY CHART MOVES TIME TURNS
Long year[s] of experience have proved that the Daily High and Low Chart does not give the best indication of a change in trend, because one day is too short a period of time. The 2-day chart moves, which are recorded in line moves, means moves of 2 days or more up or down. If a grain option starts advancing and only has reactions lasting one day, you do not record these reactions at all; but when a move lasts two days or more, you move the line on the chart down as long as bottoms are lower. After the price advances, making higher bottoms and higher tops for two days or more, you move the line on the 2-day chart up to the high of each day until there is another reversal.
When prices are at very high levels and fluctuations run from 7¢ to 10¢ per bushel each day, or more, the 2-day chart will often give a reversal or a time turn which would not be shown on a 3-day chart.
Example: July soybeans advanced from Nov. 22, 1949, advanced to Dec. 5th, making one reverse move on the 2-day chart. From December until February 2-6, 1950, each move on the 2-day chart was a lower top, showing that the main trend was down. On Feb. 6 the price declined to 219. You would buy at this level because, if you look at your resistance card, you will find that 218-3/8 is one half of the highest price at which May beans ever sold; therefore you would buy either May or July beans against this important half-way point, and place a stop-loss order at 217; but if you waited for the 2-day chart to show a change in trend you would buy when July soybeans crossed 225, when they were above the last top on the 2-day chart. From this time on there were six swings up on the 2-day chart, with bottoms and tops higher; and if you kept a Stop-loss Order just below the bottoms on the 2-day chart, you would have gotten the benefit of the complete move with a profit of nearly of $1 per bushel.
From the high of 436-3/4 in 1948 to the low of 201ẵ on May soybeans gives a half-way point of 319-1/8. July beans sold at 320-3/4 on May 8, and May soybeans sold at 323-3/4. If you had sold out and gone short around 319, you would have been right and would have made big profits in a few days. Note that from March 27 to March 30, 1950, July beans declined 16¢
per bushel in 3 days; this was the greatest reaction in price and time. Note the next reaction from April 25 to 27, a 2-day reaction with a decline of 11¢ per bushel, a smaller decline than the previous reaction, both in time and price, and no indication that the trend had turned.
May 3rd, high 317; May 5th, low 298-1/8; a decline of 19¢ per bushel, which was 3¢ greater than the previous decline which made low of March 30. This had overbalanced the price reaction but had not overbalanced the time period of 3 days. A 2-day rally followed, reaching high at 320-3/4 on May 8, making a very small gain the last day and failing to reach 4¢ per bushel above the previous top. This is where the 2-day chart, at this extreme, shows a reversal that the 3-day chart would not show. This was a time turn on the 20-day [2-day] chart and if you waited for lower process the second day you would still have been able to sell at high levels. When the price declined 297ẵ on May 12, it was below the bottom of May 5 and the
first time that a 2-day bottom had been broken since February 6. December [Remember] we have a rule which says that these fast moves last about 3 months and February, May, August and November are important months for changes in trend.
The decline continued and on May 17, July soybeans declined to 284ẵ. Note the last bottom on the 2-day chart on April 27 was 284, making this a double bottom and a buying level.
Every day’s top on the daily chart has been lower and the price has declined 1/3 from the low of 219 to 320-3/4, making this a support level. May 18 the price advanced above the previous day’s top for the first time since May 8.
May 23, July soybeans high 301. Please note that the half-way point between 320-3/4 and 284ẵ is 302-5/8. This is the first resistance level or selling level because the main trend has already turned down on the 2-day chart, and May 24 will be the sixth day’s advance.
Therefore it is important to watch for a change in trend when the price is up 7 days from the low, and especially when it is around an important half-way point. When July beans make top on this rally and decline and break the double bottom at 284, they will then indicate the half- way point between 219 and 320-3/4, which is 269-7/8. Note that there is a series of tops and bottoms on the daily high and low chart between 267 and 271, but the old top at 264, made on March 27, is important for support. Note the 5/8 point between 405 and 44 is 269-5/8 and 5/8 of 436-3/4 is 273. 7/8 of 276ẵ to 201ẵ is 267, and ẳ between 201ẵ and 436-3/4 is 260-3/8.
You should have all of these important resistance levels marked on your Daily and 2-day charts.
TIME RESISTANCE LEVELS
You can figure Time Resistance Levels the same as you figure Price Resistance Levels.
Divide the year into 8 equal parts, which is approximately 45 days each, and divide the year by 3 which gives 120 days or 4 months. Watch these time periods for important changes. Start to figure time from extreme high and extreme low levels and do not use the calendar year.
Example: 1947, Nov. 29 was high on wheat and there was a double top on Jan.16, 1948.
Therefore, the time period should be figured from these dates. May soybeans also reached high on Jan. 16, 1948. On Feb. 9, 1948, May soybeans sold at 201ẵ which was the last extreme low. Using this time period and adding 90 days or ẳ of a year, you would expect a change in trend about May 8, 1950, and this was the exact day soybeans reached top. The last extreme low on July beans was Feb. 6, 1950, just 3 days from the low date of 1948. May soybeans also made the last extreme low on Feb.3, 1950. Suppose that the seasonal trend continues down on wheat, you would watch for change in trend around August 8 to 10, and August 23 and 25 in 1950. However, apply all of the rules and follow the trend indications on the 2-day chart as they develop. Analyze all the other grain options in the same way that we have analyzed July soybeans.
Remember, the more time you put in studying and learning, the more profits you will take out later. Never guess; follow rules and wait for a definite indication before you make a trade.
May 23, 1950 W.D. GANN