Who this entry is for — The book's most convincing experiment: a table of weekly highs and lows of a nameless stock, no fundamentals, no news — and channel analysis extracting a complete operating prediction. Then the real data telling how it went.
Source: J. M. Hurst, The Profit Magic of Stock Transaction Timing, Prentice-Hall, 1970 — Chapter 4, Use This Example as Your Channel Prediction Guide → The Kind of Results You Can Achieve (pp. 71–77, Figs. IV-1/IV-5).
Prerequisites
Envelope construction and the state table — the procedure executed here in full.
The blind experiment
In plain words — Hurst gives you numbers only: each Friday's high and low for a stock called "Z Corp". First he asks what you can make of the raw list (little). Then he plots it (better, still no decisions). Then the envelopes — and everything changes.
The three-act game is built so the reader measures the added value of each step. The bare tabulation says nothing operational; the conventional chart (Fig. IV-1) "adds visibility" but does not answer the questions that count — buy? now? later? short? You do not even know the company's name, its dividends, or what the market is doing.
First envelope (Fig. IV-2): it encloses a component with eight samples of ~5–7 weeks; one 3-week sample is magnitude-duration fluctuation and is discarded; the average of the seven valid ones is 6.0 weeks. Three brief overruns stay outside the bounds — the minimum-width compromise documented point by point. Immediate reading: near-term trend down, ~3 more weeks of decline (the last 6-week cycle is 3 weeks along): no buying now.
Second envelope (Fig. IV-3): a single complete cycle, 19 weeks. And here visibility explodes: the centre line of the outer channel — the sum of everything longer than 19 weeks — has rounded a bottom and points up; the 19-week cycle is ~16 weeks along, hence due to low out in ~3 weeks, together with the 6-week one. "Our interest stirs": no shorting, and a purchase two to three weeks out.
The prediction, in writing
Card — The prediction (Fig. IV-4, channels projected 5 months)
- Buy, do not short.
- Entry in ~3 weeks, around 7¼–7½ (projected lower bound of the outer channel).
- Rise over the following 8–10 weeks toward ~11¼: +55%, ≈330%/yr.
- Next low (L-4) 19 weeks after the first; the October high past the halfway mark, on the outer channel's uptrend.
Only now do you ask your data source for the name — Gruen Industries — "if you wish, check out the fundamentals; you've got several weeks of waiting anyway".
The outcome
In plain words — Timing and moves "very close to being correct" for five months. Bought at 7¼ in the third week; the 11¼ target arrived in four weeks instead of eight-to-ten; and the envelopes, re-run weekly, warned in advance that the stock would do even better.
The real data (Fig. IV-5) confirm the prediction over five months. And the most instructive part is the management: re-running the analysis each week, as early as the third week after purchase the premature, upside puncture of the inner envelope — then of the outer one too — signalled it was "far too early for a peak of the 19-week cycle": channels re-estimated, target raised to ~12. Close: +62% net in eight weeks — an equivalent compounded yield of ≈2,313% per year.
Warning — The point of the case is not the 62%: it is that every conclusion was reached knowing nothing of fundamentals, "without even knowing the name of the issue". And the prediction was no oracle: it was an estimate with windows and tolerances, updated at every bar — so much so that its best contribution was correcting itself upward mid-flight.
What descends from this case
- the edge-band vs mid-band comparison — the two entries tested on this very rise (418% vs 539% per year);
- the valid trend line — the trigger that turned the predicted zone into an order;
- the construction and state method — executed here start to finish.
Links
- Graphic buy timing — Chapter 4's framework
- Hurst nominal cycles — the 6.0 and the 19 against the table
- Hurst tradition — chapter index