Technical Analysis and Stock Market Profits

Technical Analysis and Stock Market Profits

Richard Schabacker
Jun 16, 2005
Harriman House
Richard W. Schabacker's great work, Technical Analysis and Stock Market Profits, is a worthy addition to any technical analyst's personal library or any market library. His "pioneering research" represents one of the finest works ever produced on technical analysis, and this book remains an example of the highest order of analytical quality and incisive trading wisdom.

Originally devised as a practical course for investors, it is as alive, vital and instructional today as the day it was written. It paved the way for Robert Edwards and John Magee's best-selling Technical Analysis of Stock Trends - a debt which is acknowledged in their foreword: 'Part One is based in large part on the pioneer researches and writings of the late Richard Schabacker.'

Schabacker presents technical analysis as a totally organized subject and comprehensively lays out the various important patterns, formations, trends, support and resistance areas, and associated supporting technical detail. He presents factors that can be confidently relied on, and gives equal attention to the blemishes and weaknesses that can upset the best of analytical forecasts: Factors which investors would do well to absorb and apply when undertaking the fascinating game of price, time and volume analysis.
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Technical Analysis and Stock Market Profits by Richard W Schabacker

There have been many dozens, probably many hundreds, of books written about Technical Analysis. Some books become lauded and are regarded as “the bible”. In recent years, Murphy’s “Technical Analysis of the Financial Markets” is probably the best known. Before that, Edwards and McGee’s work in the 1950/60’s was regarded as seminal.

But the one book that I think really deserves to be regarded as The One True Guide to TA is this book – “Technical Analysis and Stock Market Profits” by Richard W Schabacker. Not one of the names that trips off the tongue – in fact, most people have probably never heard of him. I hadn’t until a couple of years ago, when I followed a recommendation of a presenter at Index.

But what a treasure trove this book is – extensive, in depth discussion about patterns and what they mean; the best discussion of the importance of volume in conjunction with chart patterns that I have ever read. Not just an idle discussion of “this looks like a cup and handle, this is a head and shoulders”, either. In the vast majority of cases also a discussion about what the pattern represents in terms of the psychology of the market’s participants: why the pattern represents a continuation or reversal, how the price and volume are showing the feelings of the people buying and selling the stock.

He also finds time to deal with trading tactics as well, in a very useful chapter at the end, covering things like limit v market orders, selection of stocks and managing risk. Not, admittedly in the depth of the coverage of the TA portion of the book, but in recognition that the “Stock Market Profits” part is the whole reason for the “Technical Analysis” part.

So, the books good (I’d say ‘great’, but let’s not quibble). So, it’s another TA book. Why not go to the origjnals? Why not use Murphy or Edwards and McGee? Or some other guru? Why use this retread instead of the source?

Fair point – who needs another Johnny Come Lately book, covering the same old ground as previous masters. Well, maybe no one. One small point though – just have a little look inside the front cover at when this book was first published.


20 years before Edwards and McGee. 50 years before Murphy. This is one of the true fountainheads of TA. Now, admittedly there were a few earlier practitioners, but as far as I can make out, this book (originally published as a series of pamphlets) was the first that really codified the study of TA as a cohesive whole. This is the one on which an awful lot of the rest are based. Edwards and McGee? One of them was Schabacker’s son in law – their book is an (official) rework of Schabacker’s book. In this book he invents the term “support” – how much more fundamental to TA can you get?

To finish with, a couple of quotes from the back cover: “this ground-breaking book – a major text on TA”; “the source material”; “the original work by the founder of TA”. Just a few snippets from some random selection of people off the street.

(That’s respectively, Alexander Elder, John Bollinger, and Welles Wilder – who, between them, maybe have some idea what they’re talking about).

The best book on TA ever? Could be!

Does it have fault? No! Well…. OK, yes, a couple of minor ones. No mention of candlesticks at all – not popular in the 1930s (well, not in America, anyway). And technology has rather overtaken his views on the usability of short-term charts – the data available to modern traders would have been unimaginable to a trader in the 30s, so you won’t find a lot on trading using intraday charts, or using Level 2 to scalp trades. But the core TA is as relevant today as it was when Schabacker was inventing and/or disseminating many of the major concepts, 70 years ao.