Chapter 4, 45 Years in Wall Street, Gann says: (my comments in brackets)
One of the greatest discoveries I ever made (well if he says that, we
had better pay attention) was how to figure the percentage of high and
low prices on the averages and individual stocks. The percentages of
extreme high and low levels indicate future resistance levels.
There is a relation between every low price to some future high price
and a percentage of the low price indicates what levels to expect the
next high price...
the percentage of the high price tells where to expect low prices in the
the most important resistance level (to expect future lows) is 50% of
any high price.
See the cotton chart, a couple of examples just for starters
I have not always found this of use in a lot of Australian stocks,
especially working off percentages of lows. Mid points work better for
me. However a stock that falls from its all time high, will bounce at
50% levels off the high. For example pbl
Dividing the extreme range into quarters can also be useful, eg on the
cotton chart, (96 - 26) /4 = 17.5. 26 + 17.5 = 43.5, + 17.5 = 61 half
way between, + 17.5 = 78.5 for resistance points to give tops and
bottoms. It was combining these points with time frames that gave Gann
his trading ability.
If we have a look at the Dow, half of the all time high, 11750 is 5875.
If the dow was to fall this low, such a price should be a bottom. It is
not at all positive for a market, if that market fails to hold above
this level, and goes below, such as what the nasdaq has done.
With recent Dow low 24/7, we can anticipate a retracement to the mid
point of 10673 19/3 high and 7532, or 10353 17/5 high and 7532. I would
average these two results, being 9022, for a likely top, which should
happen on a significant date. A higher or lower price tells us something
about the next move after that. Let's see.
Do note, the good turn on Aug 6th, being 120 days from Dec 4th eclipse,
120 degrees from Dec 6th, indicates this time to be a very important 2
dates to watch now.
December Cotton - PDF