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, October 8, 2010

US Banks - the party poopers!

I love a good party me. The booze, the music, the 'craic' (pronounced crack) as the Irish say and the inevitable hangover the next day. But let's face it, every party has its resident pooper. You know the ones - while everyone around are enjoying themselves, they sit in the corner, not wanting to join in, won't let you chat them up, seemingly wishing they were somewhere else..!

The (Investment) banks that got bailed by the Fed not so long ago have been the party poopers of this latest market rally and is that a possible warning sign? Would they rather be somewhere else? Guess we'll soon find out.

Let's start with Goldman (2.5x3 close). Still caught in its triangle formation, can't break out up or down. It will resolve soon. Unactivated upside target of $200 required a close above $155, filling the $157.5 box. To the downside, there is an unactivated target of $102.5, requiring the price to fall below $135 to activate. All eyes on Q3 earnings and outlook i'd suggest!!

Bank of America, currently looking like a bit of a wreck to me. Granted, the rally off the bottom in 09 has been impressive but this has been steroids assisted and the chart appears to be rolling over with the bears back in control for now. If you 'flipped' this chart, you might be thinking 'double top' So i'm thinking a potential double bottom back down towards that target of $4, which is now active (remember where you first heard it!!)

CitiGroup, still looks like a dead man walking. Keen observers will also see one of the most obvious flaws of daily closing P&F charts. The conventional price targeting would give Citi a downside target of $0 based on that last column of 14 0's down!! For a stock at this level you'd really need to look at hourly charts, with a box size of an eighth or quarter perhaps.
Those of a bullish disposition could ask the question has Citi bottomed? Well, from $1 it couldn't go much lower and to be fair, that last column of X's has given an upside target of $12, which will become active should the price reverse up and we see a new column of X's move through $6.

And finally it's interesting to note that JPM, has probably been the one out of all four to have donned its party rags, joined in the recent fun and not pooped as much as the others. Currently stuck in a $5 range between $36 and $41 (the support at $36 twice is clear for all to see) but that $5 to the upside from $36 did provide a tidy gain of 13%. So this $36 level is clearly important and needs to be taken out to get that downside target of $25 active.
There is also an unactivated upside target of $51which requires a reversal upwards and a column of X's taking out both the resistance level at $41 and the diagonal red bearish resistance line looming above.

Given the way the US markets rallied in September will it be a case of these banks joining the party just as everyone is leaving, or were they themselves the first to leave in a bad mood, sensing the party was about to end in dramatic fashion?? Or will the Fed's punchbowl keep everyone in an inebriated state of elevation through to Christmas?

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