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.

Wednesday, September 8, 2010

Goldman Sachs: potential forming triangle

Here is the 2.5x3 (ie 7 points) closing P&F on Goldman Sachs. The long term blue bullish support line remains in tact for now but recent action suggests (IMO) that the stock is going to trend lower.

We have a potential forming triangle on this chart. To qualify as a triangle, the pattern must have 5 columns - there are currently four.

Usually a stock in an UPTREND will resolve the triangle to the upside and vice versa. According to P&F guru Tom Dorsey, breakouts from a triangle formation typically result in explosive moves.

The most recent column of 0's was reversed by the latest column of 3 x's and has left an unactivated downside target of $102.5. It will be activated if Goldman's share price falls below $135, filling the $135 box. A fall below $130 would take out the previous level of support and would lend strength to the bearish case/lower target.

To the upside, a move up beyond $157.5 would give a double top buy signal and a price target of $200. But in the absence of a Fed inspired major dose of QE2, its hard to see what other catalyst could propel GS's price to that level in what remains a generally poor economic climate.

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