Due to the short working week(s) over Easter, I have appended an email and my reply for your consideration. John was asking questions about the NAB examples which were in the Zoom meeting last month and the reply contains some great Gann trading examples.
I just have a couple of questions re the last chart on the Zoom meeting last month: NAB
I have marked on my attached chart the possible entries long and short on both the Weekly and Daily chart of NAB
Looking at the Weekly, it seems that when entering so aggressively as Gann did and as you are suggesting here… That the Weekly chart is almost superfluous?
The overall long-term current trend is steadily upward on the weekly but these trades are just as often against the long term trend as with it.
Also, I can’t see much use in using the MACD on the Weekly chart.
Finally does your management of a trade With the LT trend differ from that when Against the LT trend?
I hope I have explained myself clearly enough.
Have a great Easter Break,
Hope you are well; the Easter break normally means a lot of research for me which I love doing. I can go away any time when everyone else is back at work and prices and crowds are more normal.
On the NAB chart, I have made some notes for you to consider:
The left-hand side of the chart is the weekly, and you correctly noted that Gann was aggressive and in a lot of cases he was trading against the established trend. I would add though, that he only did this with good reason and where analysis was indicating that a change was more than very likely.
A case in point is the low I have marked as point A, the week ending Dec 3, 2021, has been marked on weekly and daily charts.
On the weekly, which is the main chart to follow, I can see that the low of the week which was in fact Monday Nov 29 made a low at $27 exactly. Looking at the weekly chart we can then analyse that the week so far was a direct hit on a 0.1 fan line from the last major low week ending July 23. (A fan line at 0.01 on a weekly chart is simply irrelevant)
At the very same time notice the numbers $1.92 range and 19 weeks hence the symmetry with the Gann fan at 0.1.
At this point we also see that the low is within 5 cents (an irrelevant difference) of being a square of the number 52,or 52 x 52 = 2704. This is the 135-degree angle on the square of 9, and remember Gann stating that “Squares are the reason and the cause for market movements”. There is significant support and resistance on this line, March 12, 2021, and Sept 24.
All of this comes from the Weekly chart.
Now moving to the daily chart looking at the low of Monday we can see it hits the 135-degree line and it is 48 bars (death zone 49) from the last daily low September 22.
So, with all of this I would be preparing to buy into NAB at around $27.45 on the daily chart if the market opens within the prior days high and low and breaks the top. As it happened, it gapped open to start at $27.60 and fell for most of the day so I am pulling my entry as it may open high and continue to fall. However, Wednesday December 1 opens lower and hits exactly on the square line and at end of day produces a Key reversal buy signal. If the next day, Thursday Dec 2 opens within the range of Wednesday and breaks the high I will buy in, and this is exactly what the market did. A retest of the square low with the other analysis from weekly chart provided a Gann trade which certainly provided a 1:1 Risk to reward.
Notice that this trade started to fail around the next even square of 54 or 2916. Looking at the weekly we see that it has not broken a weekly low until January 21, 2022, where if we exited based on this pattern we would have: Entry $27.50 Exit $28.90 Profit $1.40 per share before brokerage costs. Again, note the management of the trade comes from the weekly chart.
It is interesting in that I am re-reading Truth of the Stock tape where Gann says most people get too close to the daily or intraday movement which is hard to analyse and fools most traders. The stock tape ticker may be gone but the intraday data feed is its very close cousin, and it does the same job, panicking people out of trades too early.
I would agree with the MACD on the weekly chart, for our purposes it is much better on the daily chart.
Notice the next low on the weekly is a direct hit on the 60 ema whilst the daily is 60 days and 31 cents from the last low or a 1 x 2 fan angle. The weekly is the main signal, the daily confirms its relevance. Another entry at $27.50 stop at $26.50, a first higher low forms and at 28.25 we move the stop up to entry. The market climbs strongly only to produce a lower swing top on the daily around $31, watching the daily during a trade is the first sign of threat to our trade. With more Gann analysis we can see that the range from Nov 10 to Feb 17 is 68 cents in 67 days, or a 1 x 1 Trading Day fan. The week ending Feb 18th at point C is a 49 week count from the top March 12. The daily lower top Feb 21 is a real threat, and we close out at $30.25 and go short with Time, Price and Pattern. Trade entry $27.50 exit $30.25 profit $2.75 per share before costs.
A lot to consider here but you can see why Gann was such a profitable trader. I am doing a lot of work on NAB recently as ANZ is dead, it’s been sideways for over a year and may be accumulation or distribution. When markets go this long sideways it is gathering steam and a big move will come eventually which will be very profitable so keep an eye on it.
Hope this helps, have a great Easter and hopefully we will catch up soon. If I venture up the coast one day soon, I will give you a hoy and maybe we can catch up for coffee… as for direction in the Australian market this may be choppy until after the election. If the same government is back then trading will resume as per the past, a new government may make markets nervous for a while yet…