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.

Monday, July 19, 2010

Nikkei update

This is one market I never invest in, not for clients, nor PA. Yes there have been some spectacular bounces but how many false dawns too? How many times do you hear Japanese equity fund managers boldly proclaim that 'this will be the year that we see recovery in Japan'?? I first heard it from and old Save and Prosper fund manager back in 1995! Who would want to be a long only Japan equity fund manager??

Anyway, the chart below shows that the recent support at 9,500 has been punctured, as has the blue bullish support line. The market was down 277 points Friday at 9,408 - this is a 100x3 (ie 300 points) chart so we did not get a 3 box reversal and a new column of 0's. The index is now honing in on the longer term support at 9,100, levels where the market has held on two previous occasions. If that box gets filled, we will have a new double bottom sell signal from the previous column of o's and an activated downside price target of 7,200 (as always, no time horizon for this).

This 9,100 level (shown by the larger red circle) looks very important - expect a battle here between bulls and bears. If we see a drop below it and the 9,000 box gets filled, that would be a bearish development, as those two previous support levels would be punctured.

There is also an activated downside target of 5,900 still in play and an upside target of 14,500 (but that will become invalid if the 9,100 box gets filled). I would suggest more risks to the downside at this particular juncture because the bullish support line has been breached and we now have the more recent bearish resistance line, just my opinion but keep an open mind. Japan - its a 'killer'!

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