CYCLEPEDIAThe trading encyclopedia
IT
James Marsden Hurst 1924—2005

Chapter 4.1 — Timing Your Buys With Graphics

Graphic buy timing

Chapter 4 in one entry: envelopes for the rough prediction, the turn zone, the valid trend line as trigger, edge-band and mid-band — the method's first objective buy signals.

On this page

Who this entry is for — Chapter 4's map: where the theory of the first three chapters becomes a buy order. Envelopes to predict, patterns to confirm, the valid trend line to pull the trigger.

Source: J. M. Hurst, The Profit Magic of Stock Transaction Timing, Prentice-Hall, 1970 — Chapter 4, Timing Your Buys With Graphics (pp. 68–85).

Prerequisites

The previous chapters in full: the model, the envelope, the patterns. Here it all comes together.

The goal: "first-order" prediction

In plain words — No pretence of predicting everything: a high probability of estimating when a set of cycles will form a low (or a high) is enough — with simple, fast graphical techniques.

The chapter opens by declaring the task: identify a stock's dominant cyclic components and their current status, for a "first-order" prediction of probable turning points — graphical methods being "by far the fastest and easiest to apply". The path, in four entries:

Step What it produces Entry
Envelope construction + state table The rough prediction: time × price turn zones Construction and cyclic state
The blind experiment The proof it suffices: Z Corp → Gruen, +62% in 8 weeks Case Gruen Industries
The trigger The "valid" trend line among the many Valid trend line
The two entries At the edge or in the middle of the channel Edge-band and mid-band

What a buy signal must be

The book's two conditions — the chapter's philosophical heart, valid for any timing system:

  1. it must be capable of being set up in advance: "for these logical reasons, if the stock behaves in the future in a certain, specific manner, this action will be interpreted as a signal to buy";
  2. once executed, it must assure the highest possible probability that the stock will immediately proceed to produce the largest profit in the shortest time.

The envelope alone meets part of the requirements — it predicts, but roughly. Chapter 3's patterns (triangles and trend lines above all) supply the rest: accurate and totally objective signals, triggered by price inside the predicted windows.

HURST 1970 · CH. 4 The turn zone and the valid trend line Figs. IV-6/IV-9 redone: the signal is set up beforehand, price triggers it CYCLEPEDIA DIAGRAM — EMICICLO EXPECTED TURN ZONE valid trend line BUY TURN ZONE time × price, set in advance VTL steepest into the zone SIGNAL break above the VTL You decide beforehand; you buy when price proves it has begun.
The whole chapter in one image: the zone decided beforehand, the steepening trend lines, the break that buys.
Tap the lines and the BUY point

Points to remember (the chapter's close)

  1. Form as many envelopes as the data permit; at least one — preferably two — on components longer than the trading one.
  2. Projection of the channels from the last identifiable extreme gives advance warning of change or analysis error.
  3. Duration variation is estimated by measuring or counting low-to-low and averaging: enough to say when the next lows are likely.
  4. The ideal buy point approaches as several components near their lows together, with the sum of the longer ones on the upside (read it from the channel's centre line).
  5. A daily chart beside the weekly adds the very short cycles — timing's "verniers", usually 2–3 per longer cycle.
  6. Envelope analysis provides no clear-cut signals: it lays the groundwork; triangles and trend lines, combined with channel prediction, give precise, objective ones.
  7. Downtrend lines form only from clear-cut peaks of recognizable cyclic highs (uptrend lines from clear-cut lows).
  8. As a multiplicity of lows nears, trend lines steepen in sequence — significant only inside the predicted window.
  9. The steepest one broken upside in the expected zone is the valid trend line; its break is a valid buy signal.
  10. In the turn zone → edge-band; near the channel centre → mid-band.
  11. Mid-band yields more per unit of time but multiplies the work.
  12. Cyclic analysis of triangles is always precious extra confirmation.

Warning — This chapter only buys. Keeping the profit — cut-loss, trailing, exits — is Chapter 5's craft, and without it the method is half a method.

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