Phasing I: envelopes and the weekly chart

What phasing is

Phasing is the work of deciding which past low belongs to which cycle. This low was a 20-week low; that one was also a 40-week low. Once the past is labelled, you know where every cycle sits today and roughly when each next low is due.

It is the step everything else depends on. FLDs, targets and expected lows are only as good as the phasing behind them.

Start big

Begin on a weekly chart with several years of history. Find the most obvious major lows: the deep ones the market clearly turned from. These are the lows of a long cycle, such as the 18-month or 40-week cycle.

Measure the spacing between them. If they are roughly evenly spaced, you have found a cycle to build on.

Divide by two

Between two lows of a long cycle there should usually be one low of the cycle below it, roughly halfway. Look for it. Then divide again: between those, look for the next cycle down.

Real lows will not sit exactly halfway. Look for the clearest low near the middle, not the exact midpoint.

Check with an envelope

An envelope is a band of constant width drawn around a smoothed version of price. The smoothing removes the shorter cycles, so the band follows the longer cycle. The shorter cycle swings inside it.

If your phasing is right, the lows you labelled for the shorter cycle should sit near the lower edge of the band. A low that sits far from it is a hint you may have labelled it wrongly.

Check with the FLD

Add the FLD for the cycle you have phased. Crossings should come after the lows you labelled, in the expected direction. If they do not line up, revisit the phasing.

An honest caution

Phasing by eye involves judgement. Two careful analysts can label the same chart differently, and both can look convincing. The more you check your phasing against tools and measurement, the less it depends on taste.

Keep it live: as new lows form, update the labels. A phasing that never changes is usually one that has stopped being checked.