Dave's Set Up Examples
Trade Setup Number 1
 
ETF of Crude Oil (USO)
Below is Chart 1 of this setup. On Friday January 12th this year, I was giving a new purchaser of the software his second hour of consultation when the client asked me what I thought of the crude oil market which was in a sever downtrend. He suggested that we look at USO, the ETF of Crude Oil. Below is the chart that we pulled up that day.
 
Chart 1
The first thing I do when pulling up a new stock or other tradable is to find the last Quarterly High or Low on the Swing Charts  In this case that was the high of 74.60 in July of 2006. I then place my Principle of Squares Indicator at 74.60  and note that on January 12th, the price was trading down 360 degrees from that July high. This is important because we can see many important tradable lows at 90/180/270 or 360 down in price from the high. In this case, the price declined to -270 degrees before it tried to base. Once the price declined sharply below 51, it plunged in heavy volume to 42, which looked like a volume climax. The second indicator I applied to this chart was the Gann Square time indicator which I set at the 74.60 high with a separation of 22.5 degrees. That is the two down arrows you see in the top left side of the chart. Every 22.5 degrees in time the program places a vertical line  on the chart. Once again, we are looking for the price to reverse or show stability at -90/180/270 or 360 down. Once I applied this indicator to the chart it was immediately apparent that we were “Squaring out Price and Time” on the next trading day, down 360 degrees in price and 180 degrees in time.  I then told the client that there was a high probability that crude was making an important intermediate low. I also told him he could buy the USO early the next week because we would like to have evidence that the price was being supported in the area. I also recommended he look at several highly ranked oil sector stocks in IBD. Since it was a Friday, we had all weekend to find the item we which to trade.  I also noted to him that Steve Woods had stated in his FloatChart Newsletter that day that the oil stocks looked ready for an up move.
 
Helmerich & Payne Inc (HP)
On Saturday, I decided to take a look at my favorite drilling stock, HP to see if it too was setting up. Below is Chart 2.
 
Chart 2
 
Helmerich & Payne Inc (HP)
At A, we can see that HP was below it’s 50 day average but had just had a two plot week to the upside. This chart shows the daily price action with weekly boxes. The weekly boxes show how each weekly bar was made. I prefer to look at this chart rather than a weekly candlesticks chart. You can also see that HP was showing lots of green volume bars showing accumulation. In addition, I show the Reif Daily Accumulation and Distribution Indicator (Reif AVX) in the center panel. As you can see there was a pair of Real Accumulation Day’s (RAD’s) back in October of 2006 which led to a rally from 23 to 27.85 in 9 weeks. As it turns out, we had a RAD on that very Friday as it appeared the stocks were leading the crude price.  As a last check, I looked at Chart 3 below.
 
Chart 3
The arrow at A shows the 90 degree price square from the last quarterly high of HP at 40.23 on 5/11/06. The Gann Square Time Indicator starts on that date with 30 degrees separation. I have found through experience, the oil and gas stocks vibrate at 30 degrees separation in price and time.  In this case we can see that the price declined back to the -270 angle from high and we are very near the 240 degree angle in time. (Note: The market IS NOT a Swiss Watch, so you just need to be  in the area of the price and time square). In addition at B, we have bounced upward from the Woods 50% float channel, another bullish event.  I decided to buy HP at the open on Monday, 1/16/07 and was filled at 24.17.  I set my first target at -180 down from high at 28.54 + or -, which is just above the 200 day ma. My stop is below the low of the two plot up week, or last weeks low.  
 
ETF of Crude Oil (USO)
Chart 4 shows the action after the square of price and time at A. Note that the price stabilized 4 days, crossing back and forth below and above the -360 price square. This is what we want to see.
 
Chart 4
The price closes the week near its high for the week, another positive sign.  If you bought USO on the open 1/22/07 at 44.82 (B), you could set your target up 90 degrees at 50.94. I would have sold open on 2/23/07 only one month later for a profit of 13%..
 
Helmerich & Payne Inc (HP)
Chart 5 shows 5the results of buying HP on the open 1/16/07.
 
Chart 5
HP made a straight line move up to the target on 2/5/07 making a profit of nearly 18% in 15 trading days. Yes the stock made more than the crude which shows the stock was leading the move. You could have bought back a piece when the price pulled back 30 degree and hit the near intersection of the falling 200 ma and the rising 50 ma. If price exceeds the last high, the odds are for much higher prices. Another way to have played this trade was to observe that the stock was rising at a steeper angle than prior rallies and therefore sell only half of the stock and ride the rest for the big move. This is a policy I highly recommend. as it is the best way to get a good position and ride it for big gains.

 

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