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ld Timer for the past ten years。running and the No。 5 Bond Timer for the past ten years。 In 2003； Aaron Task。of TheStreet selected Schaeffer as。the market 〃Guru of the Year。〃 Schaeffer is。the proud recipient of the 2004 Traders’ Library Trader's。Hall of Fame Award for his。numerousntributions。to the field of trading。 In addition； Schaeffer received the Best of the Best Award from the Market Technicians。Association for hisntributions。to
sentiment/psychological analysis。
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Yosuke Shimizu。is。the general manager of the investment information department at Monex； Inc。； which he joined in 2003。 His。work。is。devoted to investor education through the explanation and analysis。of market activities。for individual investors。 Shimizu is。also well known for his practical technical analysis。techniques。acquired through his。sales。and trading experiences。at major securities。firms。 Previously； he worked at Daiwa Securities。 Shimizu is。a member of the Security Analysts。Association of Japan and the Nippon Technical Analysts Association。 He holds a BA in law from Keio University。
Acknowledgments
This。book。was。a collaboration of many people； each lending their expertise to create a final product in which we can all take pride。 I would like to thank。the following individuals。for their specificntributions：
My wife Carrie； for challenging me； encouraging me； and sharing this。journey。
My family； for always。reminding me to 〃relax and let it flow。〃
The hardworking people at Bloomberg Press： Sophia Efthimiatiou for her enthusiasm and careful planning。 Mary Ann McGuigan and Janet Coleman for their tireless。work。in editing the content； and the production team： Mary Macher； Dru…Ann Chuchran； and JoAnne Kanaval。
Sieve Araki of Bloomberg Markets magazine for his。gracious。help wilth the Japanese translation。
The ten contributors。who took。time out of the trading day to lend us。powerful insight into market dynamics。
And finally； the technical analysts。and traders。I have met over the years； who have taught me to always。be a student of the markets。
Introduction
One day back in early。2001； I called an equity salesperson in Chicago to ask。whether he would be interested in meeting to discuss。some technical analysis。techniques。 He quickly。declined； calling technical analysis。a 〃voodoo science'* and arguing that it was。fundamental analysis。that truly drives。the markets。
Two years。later； I received a call from that same salesperson。 He had had a major change of heart。 He invited me lo visit him so that we could talk。about technical analysis。 I wondered what had made him change his。mind。 He said that his。clients。had started observing charts； and that if he wanted to keep their business。he had to learn how to speak。their language。
Traveling around the United States。and Canada to discuss。technical analysis。with traders； fund managers； analysis； and investors； I have e to two conclusions： Market participants。today are using technical analysis。more than ever before； and most of them are struggling to identity which techniques。they should be applying to their markets of interest。
Every year； I find myself spending increasingly more time talking to portfolio managers。who are using a hybrid of fundamental and technical analysis。to identify potential investments。 As。a result； I get more and more calls from salespeople and sales。traders； all scrambling to understand how to incorporate technical analysis。into their conversations。
Here's。how I introduce technical analysis。to those newly converted to the technical approach： Fundamental analysis。tells。you the 〃what〃 and the 〃why；〃 whereas。technical analysis。tells。you the 〃when〃 and the 〃how。〃 Analyzing a pany's。financial statements； the broad economic。picture； and other fundamental factors。helps investors。identify which securities。should be moving based on market environment。 But when you look。at a price chart； you're peeking into the minds。of millions。of traders。to gauge their collective psychology。 What's。more； you're studying trends。and momentum to see how traders。have reacted to historical events。and news。flow。 That's。why investing without looking at a chart puts。you at a major disadvantage。
One of the questions。I pose at the beginning of seminars。is。〃Does。technical analysis work because people use it； or do people use it because it works？〃 The first part of that question positions。technical analysis。as。a self…fulfilling prophecy—if enough people expect a certain price movement and make trades。in anticipation of that movement； then the price will move as。a result of their own actions。 The second part suggests。that there is。in fact value in technical analysis。as。a method of breaking down investor sentiment and market psychology。over lime。
All of the authors。in this。book。have developed certain techniques。that have helped them to successfully trade and analyze various。global markets。 This。book is。designed to bring their ideas。together and help von draw on their experiences。and incorporate their concepts。into your own trading。
In planning the book； I realized that although more and more investors。had broadened their approach to allow for international markets； the existing technical analysis。literature was。still quite localized。 In meeting with technical analysts。and traders。from around the world and from organizations。such as。the Market Technicians。Association； I've learned that each region has。its。own experts。who have successfully tailored their technical strategies to the local markets。
The goal for the book。was。to assemble some of the top minds。in the field from all parts of the world and have them share their insights。into how price and volume analysis。can help investors。identify profitable trading opportunities。 The end result is。a powerful illustration of how interrelated the financial markets。really are： it's。also a testament to the global reach of technical analysis。as。a language of the markets。
Each chapter in Breakthroughs。in Technical Analysis。is。intended to stand independently。 You can study a single chapter； and then apply those concepts。to your own charts。and markets。before you move on to another。 Keep in mind that although the author may be writing about； say； Australian index futures or U。S。 Treasury spreads； the concepts discussed can be readily applied to any。market； and often on different time periods than those discussed in the chapter。
We start with Ted Hearne's。discussion of a technique called 〃Drummond Geometry〃 as。applied to the foreign exchange markets。 You'll find it's。a great breakdown of how open/high/low/close data can be used to identify support and resistance； meaning levels。at which the price tends。to reverse。 His。examples。demonstrate the value of studying different lime dames。（that is： daily； weekly； monthly； etc。） to see how short…term price moves。flit into the long…term trend。
Tom DeMark。goes。to great lengths。to analyze price trends。and ways。in which markets。reverse direction。 In his。chapter； DeMark。discusses one of his。market…timing techniques； TD bo 。。 Although many traders。have worked with TD Sequential 。； one of DeMark's。other indicators； this。chapter shows。when and why。TD bo's。more conservative approach to trend exhaustion can help an investor identity low…risk trading opportunities。 He also presents。methods。to tweak。both these techniques。to make them more aggressive； methods。that can often give an early warning of a trend reversal。
Nicole Elliott breaks。down a traditional Japanese technique called Ichimoku Kinko Hyo； in which price data is used to create a series。of indicators。to measure the strength of a trend； as。well as。potential support and resistance areas。 This。trend…following technique is。used heavily by Japanese investors。and has grown in popularity in the United States。and Europe。 Many people who see this。technique for the first time are overwhelmed by the amount of information the chart provides。 Elliot does。an exceptional job of cutting through that noise to explain the true value of Ichimoku charts。
Yosuke Shimizu takes us。through the world of candlestick。analysis from a Japanese perspective。 Many of you may have heard of or even used patterns。with peculiar names。such as。〃abandoned baby〃 or 〃hanging man。〃 Shimizu…san explains。why these names。are used and how they can add great value to your investment approach。 His。chapter； translated from Japanese； provides。original insight into why traders。have used these techniques。for centuries； in a language that evokes the spirit of the region。
We return to a U。S。 perspective with Constance Brown； who in her chapter shares。with us。her powerful charting acumen。 Incorporating Gann analysis； Fibonacci retracements； and her own proprietary indicators； she has。developed a sophisticated methodology for trading market moves。more effectively。 Brown graciously includes。the formula behind her unique indicator； the posite Index； and demonstrates how to efficiently bine technical approaches。
David Bowden takes。us。to the Australian markets。through his。own trading experiences using Gann analysis—a series。of technical indicators。that are often misunderstood because of their mystical nature。 Walking us。through his。successes。and failures。in anticipating tops and bottoms； Bowden's。discussion of the cyclical natu