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.

Friday, July 23, 2010

Dow Jones update

Yesterday the Dow Jones closed up 201 points. This gave rise to a three box reversal on the 50x3 closing chart, as 150 points fills three boxes of 50 and a further 50 points created a new up column of four X's. This has brought the index up to the level where the previous up column of X's reversed, around the 10,300-350 level . The long term (blue) bullish support line remains in tact, as does the shorter term bullish support line.

The 50x3 looks a little cluttered at the moment. There is an activated downside target of 8,900 (not 8,950 as shown, apologies), which was given by that column of 15 0's from the top of the chart. This was activated when the next column of 0's passed beneath the previous level at 10,400, filling the 10,350 box and giving a double bottom sell signal.

The 100x3 closing chart, as it name suggests, requires moves of 100 points to fill one box and therefore contains less 'noise' than the 50x3. Here we have an activated upside target of 13,000, which activated when the column of X's containing the month numbers 3 and 4 filled the 10,800 box, creating a double top buy signal.

More recently however, the shorter term bullish support has been punctured and we have two shorter term bearish resistance lines. The primary trend remains higher, as evidenced by the thicker blue line.

To the downside, we have an activated target of 8,100, with no time frame to achieve. Keep an open mind but the current shape of the chart currently suggests more risk to the downside at the time. As the Q2 earnings season peters out (and bear in mind this is all past results) what catalysts will drive this market higher?

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