📖William Gann
Earnings Quality Analysis
Evaluate earnings quality, not just quantity.
Not all earnings are equal. Look for recurring, cash-backed earnings rather than accounting profits. High-quality earnings are predictable, sustainable, and convertible to free cash flow.
🏠 Everyday Analogy
📖 Core Interpretation
In Earnings Quality Analysis, W.D. Gann focuses on the gap between price and value. Returns come from paying less than what a business is worth, not from guessing short-term market moves.
💎 Key Insight：Cash-backed recurring earnings indicate true business strength.
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❓ Why It Matters
Ignoring valuation turns even good companies into poor investments. Overpaying compresses future returns and leaves little margin when assumptions are wrong.
🎯 How to Practice
Estimate intrinsic value with conservative assumptions, set clear buy ranges, and act only when price offers a meaningful discount with acceptable downside.
⚠️ Common Pitfalls
Confusing a low price with true cheapness
Using one metric without business context
Overly optimistic assumptions that erase margin of safety
📚 Case Studies
1
Dow Jones Crash and Gann Retracements (1929)
After the 1929 peak near 381, the Dow plunged and later retraced key Gann levels, notably around the 50% and 62.5% zones, signaling potential resistance and trading opportunities for disciplined followers of percentage retracement rules.
✨ Outcome：Traders using Gann retracements managed risk, capturing partial rebounds while avoiding full re-entry before a durable long-term bottom.
2
Post‑Crisis S&P 500 Bottom and Recovery (2009)
Following the 2007–2009 bear market, the S&P 500 bottomed near 666, then advanced and repeatedly respected Gann-type retracements around 33%, 50%, and 62.5% during the early recovery phase, offering structured buy‑the‑dip entries for systematic traders.
✨ Outcome：Investors applying Gann percentage retracements scaled into the new bull market with defined risk, improving entry prices versus chasing breakouts.
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