Welcome to EV's point and figures. This blog is dedicated to the use of point and figure charts in technical analysis.

Although P&F first appeared in charts in the 1930's, it is an often overlooked techique for analysing stocks and charts. A poor relation compared to line and bar charts and their range of momentum indicators. Yet few charts provide a clearer picture of the daily battle between bulls and bears for market control.

Like most methods, it should not be used in isolation. It should form part of an analysts 'tool box' and be used with other techniques to help form an overall view.

The charts that appear on this blog and any accompanying comments are purely for information purposes only - my own personal take on where the prices may be heading. They do not constitute investment advice.

Tuesday, July 20, 2010

Dax Update - pitch battle taking place

The Dax is an interesting index because Germany is one of the supposedly stronger economies in Europe (pre publication of bank stress tests!), it runs a healthy trade surplus and is home to some of Europe's leading companies.

It can be seen from the chart below that there is currently an epic battle being fought between bulls and bears in the 500 point 'green zone' between 5,700 and 6,200, with no clues at present as to who will prevail.

It can be seen that the activated price target of 6,200 (given by the double top buy signal in March) was met. Since then, there has been clear resistance at the 6,250/6,300 levels and support around the 5,700 level. Three times the bulls have been pushed back but each time they have regrouped and pushed the index higher. Note also the long term blue bullish support line is still in tact as is the minor blue support line, but that is under threat. The overall trend remains up.

In terms of resolution to this particular battle, we need to keep an eye on the following levels. There is currently an unactivated downside target of 5,050, given by the down column of eight 0's. In order for that to become activated, we need to see the bears take control and push the index down below 5,800. Filling the 5,800 box will create a double bottom sell signal (where the current colunm of 0's fills one box below the previous column of 0's). But there is also an unactivated upside target of 6,900, given by the most recent column of X's which reversed in to the last column of three 0's. If the market can push above those previous lines of resistance at 6,250/6,300 and fill the 6,350 box, that upside target will be activated. Either way, this should resolve itself in the coming days and weeks.

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