Technical Analysis - Gann Angles on Australian All Ordinaries Index

Gann analysis using angles is performed here. One of the strongest signals according to Gann is the 45 degree Price vs Time angle. In other words, this main line has a gradient of 1:1. Then Gann suggest drawing secondary lines which is usually fractions of this main angle such as a gradient of 1:2 or 1:3 to get lower angles.

The two charts below are for the monthly and weekly Australian All Ordinaries Index. I found that the literature on Gann angles a little inadequate especially when they talk of 45 degree angles. This is because the points on each individual stock or index has such a different range that we cannot just speak of a gradient of 1:1 (45 degrees). In other words, one unit of price with one unit of time does not usually make 45degrees depending on what range of x, y values are displayed on the graph.

Instead, for the monthly chart, I have chose for the primary line, a gradient of 10:1 and half of that which is 5:1. For the weekly chart, I used the same ratio but rationalised to weekly -> 10 * 12mths / 52 weeks = gradient of 2.3. The secondary line is then half which is 1.15:1. To emphasize, the line on the graphs are NOT chosen by line of best fit by looking at the data. Instead they are chosen using specific gradients such as 10:1, which happen to fit remarkably with the trend.

As shown in the charts, the monthly is almost touch the primary line, while the weekly has just broken through. The charts is taken from the Low Point in December 1990 to present December 2008.




The question of where the share market goes from here is a question of whether the primary line acts as a strong support or it is headed down to the secondary line.

The call is yours to make .....