Who this entry is for — A real case, taken from a charting manual of the era: same chart, two readings. The chartist applies the triangle rule; the model lists the state of the cycles — and sees further.
Source: J. M. Hurst, The Profit Magic of Stock Transaction Timing, Prentice-Hall, 1970 — Chapter 3, How to Tell in Advance if a Chart Pattern Will "Fail" (pp. 59–61, Fig. III-9). Stock: Perkin-Elmer, daily high-low chart, March–September 1961.
Prerequisites
Triangles and cyclic analysis — the mechanism. Here: the mechanism tested on real data.
The four measured periodicities
In plain words — Before judging the triangles, Hurst measures the stock's cycles with Chapter 2's method: lows, counts, averages. He finds four, nested roughly three-to-one or two-to-one.
On the Perkin-Elmer daily, counting the lows yields a complete ladder — and a fine lesson in applied nominality, with the deviations 1961 imposes on the reference values:
| Lows counted | Samples | Average duration | Model nominal |
|---|---|---|---|
| A, B, C | 2 | 13.9 weeks | 13 weeks |
| points 1–7 | 6 | 4.6 weeks | 3.25 weeks (1961 equivalent) |
| — | 12 | 2.3 weeks | 1.625 weeks (1961 equivalent) |
| — | — | 1.15 weeks | half the previous (not tabulated in the model) |
First triangle: the predicted "failure"
In plain words — The charting rule says: a triangle continues the trend that preceded it (here: up). But all four cycles pointed down. Downside exit: the rule fails, the model does not.
The small triangle at the top of the chart is made of three cycles of the 1.15-week periodicity, magnitude variation clearly visible — "more properly the chartist's flag". At the moment of the break, the state of the cycles:
| Cycle | Position | Direction |
|---|---|---|
| 13.9 weeks | 8 weeks along | hard down |
| 4.6 weeks | 3.8 weeks along | hard down |
| 2.3 weeks | 1.3 weeks along | hard down |
| 1.15 weeks | 1.1 weeks along | hard down |
"Is it any wonder that a downside breakout occurred?". But the point is another: the charting rule for triangles — probabilities favour the continuation of the preceding trend — failed here, and the manual the case comes from recorded it as a failure without explanation. Knowledge of the cycles allowed the failure to be forecast in advance: that is what turns the pattern from a bet into information.
Second triangle: agreeing with the chartist — knowing why
The large triangle on the right forms differently: one and most of a second cycle of the 4.6-week periodicity while the 13.9-week cycle goes over its top — the double-top mechanics. State of the cycles at formation:
| Cycle | Position | Direction |
|---|---|---|
| 13.9 weeks | 7.4 weeks along | hard down |
| 4.6 weeks | 3.6 weeks along | hard down |
| 2.3 weeks | 1.3 weeks along | hard down |
| 1.15 weeks | bottoming out | flat to up |
On top of that, the preceding 13.9-week cycle had printed a lower low: the sum of all components longer than 13.9 weeks was falling too. Prediction: downside breakout — "and again be right". Here the chartist's rule said the same; the difference is that the model knows why, and would have spoken even when the rule was silent or wrong.
Card — The case's method
- First measure the stock's cycles (lows, counts, averages — Ch. 2).
- Then fill in the state table: for each cycle, how far along and pointing where.
- Finally read the pattern: the exit goes the way the dominant cycles row.
Links
- Triangles and cyclic analysis — the general mechanism
- Hurst nominal cycles — nominality and deviations (13.9 vs 13; 4.6 vs 3.25)
- Chart pattern verification — Chapter 3's framework
- Hurst tradition — chapter index