Guidelines For Price Objectives
by F.M.S. Flynn and Thom Hartle
Trends come and trends go. That much, at least, is a given. An important question arises about those
trends, however: How far will a move go, and can we project how far it will? Price moves can be
predicted (more or less accurately) using any of a slew of methods, but accuracy will be likely to increase
when more than one method agree on a given price level. (This is, of course, the "safety in numbers"
theory and is certainly not unique to technical analysis.) But then, confirmation is important, particularly
for a novice trader; to quote technician Arthur Sklarew, "Technicians know... that price chart analysis is
not an exact science. "If projecting moves are at best an imprecise undertaking, then the fledgling trader
must make use of the methods and techniques available to formulate a price move prediction. And there
are many techniques available.
Projecting price moves is no unfamiliar task for technicians in general and chartists in particular, and the
methods by which price objectives are projected are also familiar, certainly in the pages of STOCKS &
COMMODITIES. Support and resistance, for one example, is a popular and well-used method with which to
ascertain how far a trend will travel. Determining the length of a price objective by using the head and
shoulders formation is another common technique, but for the most part segregated into the category of
reversals. Triangle measurements, swing measurements, the 50% retracement technique and midway
gaps are also methods by which price objectives can be determined (or at least hazarded). (Even the
puzzling and curious Rule of Seven has been used to project price moves, although its lack of a statistical
base make it a doubtful addition to the other techniques listed.) The use of one or more of these
techniques (if not others as well) allows the novice trader or student technician to keep a wary eye out for
some form of price action at the levels predicted to be key, whether or not it is a trend reversal.