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, June 16, 2011

TNA update: seatbacks?

It seems slightly implausible that we will see a vertical drop all the way back down. However, we are at an interesting juncture!

On this 1x3 H/L chart, the first downside target from the high (57) is active. There is a new target of 28(!) which is currently inactive but would be activated if TNA goes below 68 intraday ((ie the current column of 0's goes beneath the previous column. It is slightly ominous that on this chart, the index has moved below the 69 level where it found support previously, but as its hovering 'around' that level, the bears should be looking for a decisive move lower. I'd certainly be looking for a move closer to that 57 active target.

It can be seen that we did have a reversal to the upside recently: that column of 5 X's has given an unactivated target of 83, which needs another reversal to the upside and a move through 74 to be activated.

Using the 'closing method' (ie ignore the intraday high/lows and focus on closing level only) the chart remains short term bearish. TNA is getting close to the 64 target from the topand here the 69 level needs to hold, or else the currently unactivated target of 31 will be activated.

Does the RUT facilitate such a potentially nasty move to the downside?

Well, this 5x3 H/L chart says its possible. The index is currently at a level where we have seen previous support and note too it is sitting right on the blue bullish support line. If the current column of 0's falls beneath 770, that new target of 635 would be in play. That may seem implausible but just look at how the index moved up by 46% from its 590 bottom in August last year to the peak.

I just wonder if we might get a bit of range trading between 775 and 805 first, as we did for a few weeks back in Jan/Feb (see 1&2 to the left).

And finally the 5x3 PF using the closing method shows the index getting close to the current active of 760. It can be seen on this chart that so far we have not had a 3 box (15 point) reversal to the current column of 0's, which has so far filled 13 boxes (or 65 points) without interruption.

If we got a reversal TODAY, that column of 0's would give an unactivated target of 660, which would be active if the index reversed down and moved below 775. Interestingly, that would take the RUT right on to its long term blue bullish support line, based on this closing method.

I guess one must respect the fact that on this chart at least, while it is clearly short term bearish, that long term bullish support line and trend still prevails.

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