The Power Of The First Range Out

This statement was one that was passed around at the recent Interactive Trading Workshop in Brisbane. The idea of price forecasting and repeating ranges was well covered here and this has sparked the thought to put pen to paper and look at some examples. The understanding and practical mastering of this skill alone could help your trading profits grow. The analysis of the bigger picture is once again a vital part to success.

The first range out of a major low or a major high is extremely important when projecting any future moves. The most significant low that we could look to reference against would be in early 2003. Depending on what market you are analysing the starting point may vary, however, the application of the tool will not.

In Gann Mastery earlier this year we focused on the first range out of the March low to get a perspective on potential resistance points for the SPI. This concept has held true on many markets none better than DELL listed on the NASDAQ. The Safety in the Market software makes it simple to measure these and then apply it to other significant highs and lows.

The manual ABC pressure points tool in the software is one that I see most traders do not fully benefit from. The chart below measure that first range out on DELL $4.61 from A to B. Adding that range to higher swing bottom gave us a pressure point of $29.75. DELL had seven attempts at that price before it could break through and hold. You will note that when we did see the price breakout a solid run was formed and what was resistance then became support.

As Gann has stated “old tops become new bottoms” and this was supported again in this case. Leaving the A to B points fixed on the chart as our reference range, you can simply adjust the tool through the properties menu and relocate point C to any date and price you wish.

There are further fantastic examples of where the market has repeated the range of $4.61 and found resistance in the bullish move. The eventual high on DELL and final bullish range in October 2003 were in proportion to the initial $4.61 reference range.

Jumping to the current market, how can we use this technique to gain some price projections? DELL had a pullback from October 2003 so measuring the first range out of that yearly top we get $4.88. Add that reference range to the first lower swing top on the monthly chart and the results are below, pulling up on the 100% point.

The range has confirmed its importance and would be great to use on any future moves. By adding this range to the yearly high in May we see a recent bullish surge was started when the market found support at 50% of the reference range. Those familiar with Gann, Fibonacci and this newsletter will know the importance of the 50% rule.

Become familiar with this tool in your software and measure the ranges of markets you know well. Focus on the first range out of a major high or low and gain a greater perspective on where things could be heading. It may well be in proportion to the initial move out.

Good Trading

Aaron Lynch