All fluctuations in prices are changes in the price level about the ML first presented to investors in this Case Study Course. Each ML starts from a pivot or turning point in trend and is drawn so that it bisects the distance between the next two Pivots (Ps). Then a parallel is drawn from the second P, and another from the third P, as shown on these charts below of leading Broadcasting concerns listed on the stock exchange.
On the ABC chart below you see drawn the ML, the two parallels abbreviated MLH, with UMLH denoting the upper one and LMLH the lower. Also note the minor ML that starts with the low in Oct.1972, bisecting the distance between the high in Nov and the next low. When prices at the close on the second week in February drop below the LMLH at 39 during the second week in January that is your signal to sell short. Also another such signal was the gap-down in the third week in Jan. Further confirmation of the correctness of this short sale is given when prices drop below the major MLH the last week in Jan., at 35 area. By end of ’73 price had dropped to 19. So gain was about 33% in the 4 months shown on chart below or at rate of 100% yearly. While the mathematical probability of prices reaching the latest ML is high, you’ll note prices here couldn’t reach it, a sure signal of a big drop ahead. Capital Cities chart and the others use the same method to show you where to buy, via passing the MLH, and on a “break-away gap”.