Introduction
Today The Goodyear Tire & Rubber Company (GT), August 5th 2022, 95 years from listing on the New York Stock exchange, reports better than expected results in its Q2 results. A good time to review Goodyear from a technical, cyclical and fundamental point of view. Will Goodyear be shining again like its tires in this 1962 picture?
Recently I have been reviewing Goodyear after basing for many years. We know from W.D. Gann’s concept of the squaring of Price and Time that the longer the base (Time) the higher the move (Price) might get. A very good example of this we have seen earlier in the past year when suddenly GameStop (GME) rocketed all of a sudden to enormous heights after years of basing.
Not always Gann is easy to understand but on squaring Price and Time and how to determine the duration of market moves he was perfectly clear.
On the squaring of Price and Time he wrote in his Stock Market Course:
“This is one of the most important and valuable discoveries that I have ever made, and if you stick strictly to the rule, and always watch a stock when Price is squared by Time, or when Time and Price come together, you will be able to forecast the important change in trend with greater accuracy.”
But how to square Price and Time and determine a change in trend? He mentioned in the same course: “The squaring of Price with Time means an equal number of points up or down balancing an equal number of time periods, either days, weeks or months”.
In his commodity course he discussed another very simple way of understanding the squaring Price and Time and what may determine the increase/decrease in Price and Time.
“Besides the position of the cycle it is in and the position on angles, the height is determined by the width of the base. Reverse rule for bear market. If several weeks or months are taken up for distribution or accumulation, the greater the extent of the move up or down. The longer a market remains in a narrow range, the greater the move and the longer the duration when it starts.” W.D. Gann Commodities Course
Yes, he mentioned clearly: “the height is determined by the width of the base. Reverse rule for bear market”. So, the Price (height) is determined by the width of the base which is the Time factor and vice versa. I think this even more clearly explains the squaring of Price and Time and that the duration in Time may impact the height in Price and vice versa in a Bear market. This is the essence of squaring Price and Time. You can apply this rule in any timeframe and this is simple way of finding relevant square outs after which a new cycle starts.
In the long-term chart I reviewed recently on Goodyear I found this rule applicable. Nearly exactly the height of the decline from 1998 all-time high to the low was equal the length of the base towards the COVID low. So, after years of basing, I gave Goodyear a closer look if this might be an interesting stock for further consideration. Will Goodyear stock be shining again?
The premium subscribers further from here on our technical and cyclical review on Goodyear.
Hypothetical or simulated performance based on past cycles have many limitations. Cycles can contract, extend and invert. Hence, past performance is no guarantee for the future. No advice. Read our disclaimer.