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.
Thursday, February 24, 2011
A 300 point movement on the HSI is fairly commonplace, so this 100x3 H/L chart is quite 'noisy' and the picture could change very quickly. Remember, each box represents 100 points, x denotes 100 points up, 0 is 100 points down and to create a new column in either direction, you need a (100x3) 300 point reversal.
The first point to note is that the blue bullish support line has now given way to red bearish resistance. The market closed today at 22,601 but made an intra day low of 22,579, allowing me to fill that 22,600 box with an 'O'.
There remains an active target to the upside of 27,200, given by the column of 17 x's to the right of my Isle of Man flag (the column with the 'A' in). But that will fall away if the index can take out 22,100.
More recently, we now have two active targets to the downside, 22,300 and 21,900. There is also a more profound target of 19,500 but this has yet to be activated. It will become active if the HSI falls below 22,400 (which is only 200 points or so away, so we shall see very soon).
The 100x3 chart that uses the closing levels of the index only is actually giving similar targets to the downside. You'll see that I have not 'filled' the 22,600 box as the index did not close below this level today. Bullish support has also given away to bearish resistance.
Wednesday, February 23, 2011
Friday, February 18, 2011
Aside from now, the index has made the 88 level on two previous occasions in the last 10 years. In the period Sept 03 to Jan 04 and then Aug/Sept 2009.
From a P&F point of view, the BPI is a compilation of the percentage of stocks on SPX giving a new point and figure buy signal. What is interesting about the current level is that it is being backed by higher levels in the index.
It would be more of a concern if the index was making a higher high but the BPI was down at say 50%-60%. Then you would have some negative divergence. That said, this level is by definition technically overbought. But for now, the bulls have the ball and are advancing up the field.
Wednesday, February 16, 2011
With this latter (H/L) method, you ignore the level at the close and simply ask yourself, 'during the day, did the price achieve a higher/lower level and in doing so fill a box to the upside (or downside)?' If yes, you mark a new X or O, depending on the direction of the price.
These H/L charts can often throw up quite different pictures compared to those based on the closing price/level. Take the FTSE 100 for example:
This is a 'noisy 10x3' high low chart, ie each box represents just 10 points on the index and to reverse each column requires a (10x3) 30 point movement in the opposite direction. This chart is currently showing an intense battle going on between the bulls and the bears, with 6,090 marking the line in the sand. At this level, the bulls have been batted back on three occasions since the turn of the year. There is clear resistance at this level. As a general guide, the greater the resisistance, the more powerful the move to the upside once the resistance is broken (the same applies for breaks of support in down markets) so this 6,090 level is one the bulls will need to take out for the rally to continue.
Tuesday, February 15, 2011
Clearly there are no targets to the downside currently in play. If the yield can push through that previous high at 4.85%, it would strengthen the argument for a sharp move higher.
Wednesday, February 2, 2011
Starting with the Dow Jones (100x3) it can be seen that the index was rolling over very nicely until QE2 was announced in September. That has pushed the index higher. At this time there are no activated price targets to the downside and i'd suggest 13,000 is achievable.
Hong Kong and China are closely linked but thier respective markets have not been moving in tandem most recently. The HSI (250x3) is having a bit of a pause at the moment in what looks like a forming triangle - how this pattern resolves itself will determine its next move (ie higher or lower) The 24,250 target was met but where the HSI goes from here could be heavily influenced by how the Chinese markets behave in the next few months. A move (and hold) above 25,000 would be very positive, save some previous overhead resistance at 26,750.
And finally to India. Like a good vindaloo, the BSE Sensex has been a bit 'fiery' of late. Looking back it can be seen that all of those activated price targets to the upside from the 2009 low have been met and the (blue) bullish support line is still in place. But look at all the brutal battles that have taken place between bears and bulls between late 2009 and mid 2010, before the bulls regained control and pushed the index up the recent highs. For the short term at least, the index is painting a bearish picture, with two activated price targets pointing towards the high 16,000's. It will be interesting to see if there is any support where I have drawn the horizontal line - if that gets taken out, it negates any upside price target given by that column of X's with the number 9 at its base.
Tuesday, February 1, 2011
See how the FTSE 100 has held support from the July 2010 low. It did briefly dip below the Nov 2010 resistance level but got some support from the April 2010 peak. I'm not sure its ready to roll over just yet. I'd be looking for a more decisive move below the horizontal line to pursuade me. UK Banks are all due to report FY results in coming weeks. Still a key FTSE sector, along with Pharmas, Oil and Mining.