V.10:10 (425-426): A Gann Study of A Bull Move In Wheat by Richard Diaz

A Gann Study of A Bull Move In Wheat by Richard Diaz

Gann's methods have been studied for years and applied by many to trading stocks and commodities. Here, Richard Diaz of Refco, Inc., provides us with his Gann analysis of a bull market in wheat.

Wheat futures rallied recently more than $1.88 to trade at the highest level since 1980. The move carried from the July 8, 1991, low made at 272-1/2 in the December 1991 contract to the high made at 463- 1/4 on February 10,1992, in the March 1992 contract. Several Gann factors were exceptionally helpful in calling the top price as well as its timing.

Figure 1 is a daily continuation chart that plots the relevant futures contract and adjusts the price scale when the switch is made from one contract to the next. Thus, on June 14, 1991, July wheat went out at 293 and the December contract settled at 310-1/4 on that day (I skip the September contract because I prefer to work on a longer run of contract) . From that point on through November 15,1991, the chart plots the price activity of the December 1991 contract. Adjusting the price scale allows a realistic appraisal of the continuous price movement.

Figure 2 is Gann's square of nine and is very useful in determining future time/price intervals that are significant to a given key high or low price. The low made on July 8, 1991, was 272-1/2, and this number can be found along the 225-degree line in the eighth cycle. The strongest points for resistance in both price and time are at the opposition points (180 degrees apart) and at the full-cycle points (a complete move of 360 degrees). Starting at 31, note the numbers along the 45-degree line (opposition) and along the 225-degree line, that is, 31, 43, 57, 73, 91, and so on. Figure 3 indicates where these numbers, taken as market days from the low of July 8, 1991, occurred.