Monthly and Weekly Rules

Introduction

Gann said the same rules that apply to yearly cycles also apply to monthly, weekly and daily movements. This lesson explains Gann's practical rules for forecasting monthly and weekly moves, which are very useful for swing and positional traders in India.

Monthly Rules

• In a bull market, reactions usually last about 2 months, and the trend often turns up again in the third month.
• In a bear market, rallies usually last about 2 months before the downtrend resumes in the third month.
• Watch for changes 30, 60, 90, 120, 180, 270 and 360 days from any important top or bottom.

Weekly Rules

• In a bull market, a stock often reacts for 2 to 3 weeks, sometimes 4, before the main uptrend resumes.
• The trend often turns up in the middle of the third week and closes higher at the end of the third week.
• In rapid markets with big volume, a move can run 6 to 7 weeks before a minor reversal.
• In very fast culmination moves, the run can last 13 to 15 weeks, about one-quarter of a year.
• Reverse these rules in a bear market.

The 7-Week (49-Day) Rule

Gann noted that 7 x 7 = 49 days, or 7 weeks, often marks an important turning point. Watch for tops or bottoms around the 49th to 52nd day. Sometimes the change comes around the 42nd to 45th day, since 45 days is one-eighth of a year. Also watch for culminations at 90 to 98 days.

Example: Weekly Pullback in a Bull Market (Illustrative)

Bharti Airtel is in a strong uptrend. It starts to fall from Rs 1,700.

• Week 1: closes at Rs 1,660.
• Week 2: closes at Rs 1,630.
• Week 3: opens lower at Rs 1,615 but recovers mid-week and closes at Rs 1,650.

This matches Gann's 3-week rule. A swing trader can buy near Rs 1,650 with a stop-loss below the week 3 low.

Example: 49-Day Top (Illustrative)

A metal stock rises sharply from Rs 120 on 1 March. On day 50 (around 19 April), it reaches Rs 165 on heavy volume and forms a bearish candle. Gann's 49 to 52-day rule, combined with heavy volume, suggests a possible top. Holders tighten stop-losses or book profits.

Trading Ranges After Tops

Gann said that after a top, a stock may react 2 to 3 weeks, rally 2 to 3 weeks without crossing the top, and then move sideways for several weeks. The best plan is to wait: buy when it crosses the highest point of the range, or sell when it breaks the lowest point.

Plan with GoPocket

On the GoPocket app, use the weekly chart to count the number of weeks in each reaction. When a pullback reaches week 3 in an uptrend and the weekly candle closes strong, plan a Delivery Limit buy with a stop-loss below the reaction low. Use AMO to place orders over the weekend.

Frequently Asked Questions

What if the reaction goes beyond 4 weeks?

Gann would treat it as a sign that the trend may be changing. Be cautious.

How do I count days from a top?

Start counting from the day after the top date. Mark 30, 45, 49 to 52, 60 and 90 days on a calendar.

Key Takeaways

• Bull market reactions often last 2 to 3 weeks or 2 months.
• Watch for turns around 49 to 52 days and 90 to 98 days.
• Fast culmination moves can run 13 to 15 weeks.

Disclaimer: Illustrative examples only.