By Mark Tinghino
Bloomberg Press
295 pages, $39.95
Most books on technical analysis do not offer much in the way of new or innovative techniques but rather cover the standard approaches from different perspectives. Tinghino’s book falls in between the innovative and mundane, as he adds unique perspectives on incorporating cycles into his technical and fundamental analysis arsenal. The author has analyzed different markets over 35 years, as well as used 23 years of real-time trading using cycles to identify trend reversals. He found that cycles are a more powerful tool when the correlated with other selective indicators, rather than used independently. Surprisingly, the author includes a chapter on fundamental analysis that really doesn’t fit the book’s title or help in producing more profit. He states that, due to the complexity of global financial markets, fundamental analysis is unwieldy as a standalone method without using technical tools. So why bother including it?
His chapter on charting covers the basics and includes a discussion of channels, support and resistance, trendlines, breakouts, reversal patterns, continuation patterns, triangles and flags, and Fibonacci retracements. He briefly covers alternative charting techniques including candlesticks, point-and-figure charts, and market profile charts with many examples. Moving average convergence/divergence (MACD) is thoroughly covered, as well as a short description of Relative Strength Index, rate of change and Gann hexagram. Tinghino devotes a separate chapter to the basics of Elliot Wave, which requires a much more in-depth discussion to be tradable. He stresses that experienced traders should use a select non-overlapping group (two or three dissimilar indicators) of noncorrelated indicators to provide the necessary confirmation of buy and sell points.
The most unique chapter of this book covers the author’s work on a cyclical model of the markets. He designed a proprietary approach and reveals a few bits of information about the model components, but not enough to incorporate into your own investing style. He discovered a high correlation of particular cycles to market prices to assist him in pinpointing buy and sell points. He provides extensive examples of short-term cycle analysis using different markets, as well as the use of a multiple cycle model. Also included is a chapter on managing risk using different types of option spreads. Although clearly written, one has to wonder why this chapter was included, as it has nothing to do with technical analysis.
Overall, for the newbie investor this is a very basic treatise on technical analysis, but the reader will not necessarily be able to create a profitable trading system as the book’s subtitle indicates. It will instead help you understand the components needed to develop such a system. Readers expecting to find a complete and detailed profitable trading system are likely to be as disappointed.
Leslie N. Masonson is president of Cash Management Resources, a financial consulting firm, and author of “All About Market Timing” and “Day Trading on the Edge.” Reach him at lesmasonson@yahoo.com .
