Richard Schabaker (1902-1938) -- the father of capital market technical analysis!
He was the first to classify the forms of general charts, research and create the famous "reversion and persistence" theory, "split" theory and "support and resistance" theory, and stereotype the use of trend lines and fully emphasize the importance of support and resistance levels. (The predecessor of the "box" theory)
Mr. Richard Shabeck warned us: "If the trend of the market or the price of a specific transaction object does not conform to someone's original analysis, the market itself is telling him to change the original analysis or choose to leave the market until a new analysis that conforms to the market trend is established!" The market is always right! As far as we are concerned, only following the trend of the times is feasible, and only in this way can we reduce losses and even make profits. So please remember: "Never argue with the price record paper tape!"
Theory of reversion and persistence
Mr. Richard Shabeck believes that the basic structure of the market (the price of the subject matter of the transaction) movement is composed of the reverse form and the continuous form.
Once the market (the price of the subject matter of the transaction) is established, it will continue to move along the existing direction (trend) until there is an external force to change the direction of movement.
Crack (notch) theory
The cracks can be divided into four types: ordinary cracks, breakthrough cracks, persistent cracks and exhaustion cracks. Among them, the common breach occurs in the form formed by the market (the price of the subject matter of the transaction), which generally has no special significance to guide the direction of the transaction, so there is no need to bother to analyze and study it.
Breakthrough cracks are usually formed in the form of effectively breaking through the boundary line (neck line, resistance line or support line) formed by the market (the price of the transaction object), that is, when the market (the price of the transaction object) moves out of its formed form. The breakthrough breach has extremely profound practical significance for guiding the trading direction!
Both persistent cracks and exhaustion cracks have nothing to do with the form. They are generated in the stage of rapid market movement (the price of the subject matter of the transaction) and are quite easy to identify.
Most of the ordinary cracks and depleted cracks are completely filled in a short time, while most of the breakthrough cracks and persistent cracks can be completely filled in a long time. To sum up: In an upward trend market, the more cracks appear, the faster the trend may approach the end.
Support and resistance theory
The terms "support" and "resistance" are widely used in technical analysis as professional terms, so what is the real meaning of the words "support" and "resistance"?
"Support" refers to the fact that there is a large amount of market demand within a certain price range so that the original downward trend is at least hindered or the upward trend is formed by completely changing this trend. Similarly, "resistance" refers to the fact that there is a large amount of market supply in a certain price range, so that the original upward trend is at least hindered or the downward trend is formed by completely changing this trend.
Theoretically, there is a certain amount of supply and a certain amount of demand at any location. The relative quantity of the two changes with the change of the market environment and determines the trend of price operation. A "support" interval represents the concentration of market demand in a certain period of time, while a "resistance" interval represents the concentration of market supply in a certain period of time. Once the "support" interval is effectively broken through, it may become the "resistance" area of the next upward trend. Similarly, once the "resistance" range is effectively broken, it may become the "support" range of the next downward trend.
Three elements to judge the strength of "support" and "resistance": volume, "river width" value (the range between the "resistance" interval and the "support" interval) and the elapsed time. The larger the trading volume of the "support" and "resistance" ranges, the longer the time it takes and the larger the range of "river width" values, the stronger the "support" and "resistance" formed by the "support" and "resistance" to the price of the underlying transaction in the future.
Tip: When breaking through the "resistance" range upward, it is effective to have the cooperation of simultaneous amplification of trading volume, while when breaking through the "support" range downward, it is effective without the cooperation of simultaneous amplification of trading volume!
